Strong brand leadership to augur well for Nestle

PETALING JAYA: On average, 2.5 million servings of Maggi noodles are consumed daily in the country with Nestle (M) Bhd’s Maggi said to be holding over 40% market share in the instant noodles category.

As of January 2025, Nestle recorded a year-on-year increase in Maggi’s market share in Malaysia’s noodles segment, said CIMB Research.

The 40% market share is based on Nestle’s own market research, CIMB Research said, adding that Maggi products are present in nine out of 10 Malaysian households.

Within total Maggi sales, the largest revenue contributor is instant noodles, followed by stocks and seasonings, sauces and recipe solutions, it said.

About 45% to 50% of Nestle’s financial year (FY) 2024 sales were derived from its food product segment.

CIMB Research has a “hold” rating for the stock with a target price of RM92.00 a share.

The downside risks cited to its FY25 to FY27 earnings estimates is weakening in consumer spending patterns amid ongoing market uncertainties such as the implementation of US tariffs on all countries, including Malaysia.

It believes Nestle’s current valuations have largely accounted for the weak near term outlook. It is trading at a 32-times 2025 price earnings ratio.

CIMB Research believes the downside risks to Nestle’s share price are limited at this juncture.

This is supported by the inelastic demand for the company’s staple goods, its strong brand leadership in Malaysia and its diversified offerings across key food and beverage categories.

In Malaysia it operates six factories, producing various food and beverage products under key brands such as Maggi, Nescafe and Milo.

Nestle currently exports to 50 countries, with halal certification serving as a core unique selling proposition.

Key export products include Maggi, confectionery, Milo and coffee-based items to markets comprising Australia, New Zealand, Singapore, Brunei, and the Middle East.

CIMB Research visited Nestle’s Maggi manufacturing facility located in Batu Tiga, Selangor, recently.

The plant is dedicated to manufacturing Maggi-branded products. It is capable of producing up to 132 stock keeping units.