BIMB Research said it is positive about Dutch Lady’s outlook.
PETALING JAYA: Dutch Lady Milk Industries Bhd
is expected to leverage its new manufacturing hub in Bandar Enstek, Negri Sembilan for growth opportunities despite a challenging cost environment.
BIMB Research, which maintained the stock’s target price at RM34, has upgraded the stock to a “buy” call from “hold”.
“We are positive about Dutch Lady’s outlook, which is underpinned by stable demand as well as long-term earnings growth, supported by the efficiency and capacity enhancements from the new facility in Negri Sembilan,” the research house said.
Noting that Dutch Lady’s long-term prospects remained intact, the research house said: “The uptrend in global dairy raw material prices and currency fluctuations, coupled with the rise in the minimum wage in Malaysia, remain key challenges moving forward.
“Additionally, Dutch Lady’s commitment to supporting local dairy farmers and adapting to evolving consumer preferences positions the company well to strengthen its presence in the Malaysian dairy market,” the research house said.The company, which released its results for the third quarter ended Sept 30, (3Q24) on Tuesday, moved to its new manufacturing hub in late May and completed the transition to full operations in 3Q24.
Net profit over the nine-month period of RM103.4mil was in line with forecasts for its financial year ending Dec 31, 2024 (FY24), accounting for 78% of net profit while 3Q24’s net profit declined 13.3% to RM30.4mil primarily due to the unavailability of some non-core Dutch Lady products for sale during the transition to its new factory and the absence of sales campaigns.
Dutch Lady also declared a second interim dividend of 25 sen per share, bringing dividends for the year to date to 50 sen per share.
In a statement on its latest financial results, Dutch Lady said it expects the business landscape in Malaysia for the remainder of 2024 to face continued challenges, due to a range of domestic and international uncertainties.
The company said it would continue to focus on optimising costs and cashflow and would be implementing organisational improvements to increase effectiveness.
It also aimed to lower its fixed-cost base to battle the current inflationary and exchange rate headwinds, as well as securing internal financing for building and transitioning to its new manufacturing and distribution facility.
