Maybank IB said the sector’s core earnings growth is projected to reach 16% in 2025.
PETALING JAYA: The consumer sector in Malaysia is expected to see decent growth next year, underpinned by increased household spending.
According to Maybank Investment Bank Research (Maybank IB), the sector’s core earnings growth is projected to reach 16% in 2025, driven by staple-food manufacturers and retailers catering to the mass-market demographic with low-priced and affordable products.
The research house, which maintained its positive outlook on the consumer sector, said spending is expected to rise next year on the back of higher average household income from civil service salary hikes, which became effective this month, and the rise in the country’s minimum wage to RM1,700 per month from RM1,500 effective Feb 1, 2025.
“Our projected core net profit growth of 16% for our basket of consumer stocks in 2025, against minus 3% in 2024, is primarily attributed to Nestle (M) Bhd
, MR DIY Group (M) Bhd and Farm Fresh Bhd on expectations for a broad-based increase in consumer spending from positive drivers to disposable income,” Maybank IB wrote in a strategy report for 2025.
“We believe that food and beverage-related companies will stand to benefit the most as consumption patterns feed into all parts of the food and beverage value chain,” it added.
Maybank IB noted that retailers who are well positioned to cater to both the bottom-40 (B40) and middle-40 (M40) categories with mass market-focused product offerings and low-price-point items, such as MR DIY, Padini Holdings Bhd and Aeon Co (M) Bhd, should also experience a boost in sales volume.
On the flip side, the research house pointed out that the higher minimum wage would add pressure on retailers such as MR DIY, 7-Eleven Malaysia Holdings Bhd and MN Holdings Bhd (MNHB) that are dependent on foreign workers in their store and warehouse operations.
This, however, would have a minimal impact on those who enjoy a higher degree of automation in their manufacturing processes such as Nestle, Heineken Malaysia Bhd and Carlsberg Brewery Malaysia Bhd.
Maybank IB noted that aside from the main sector theme of rising consumer disposable income, potential easing in average selling prices for key raw and intermediate materials for food production and product supplies, coupled with a stronger ringgit against US dollar and yuan on a year-on-year basis in 2025, may translate into improved operating margins for consumer staples and retailers.
“Our optimistic view on consumer spending momentum in 2025 stems from an expected broad-based increase in sales volume, hence we also have other ‘buy’ calls on food staples in Nestle, Farm Fresh and Leong Hup International Bhd and retailers such as MR DIY, Padini and MNHB,” it said.
The research house said that there are, however, still risks to its earnings forecasts for the consumer sector.
“For 2025, risks to our earnings forecasts could arise from unexpected spikes in raw material costs and/or supply shocks; a depreciating ringgit ; subdued consumer sentiment and demand; and adverse regulatory policy changes within the brewery or poultry sectors,” it said.
