Stock Name: NTPM
Company Name: NTPM HOLDINGS BHD
Research House: OSK
NTPM Holdings Bhd
(March 14, 54.5 sen)
Maintain neutral at 54.5 sen with target price 52 sen: NTPM's 9MFY11 results were within our full-year net profit forecast of RM50.5 million. Revenue grew 9.0% year-on-year (y-o-y) to RM315.8 million while net profit fell 10.4% y-o-y to RM40.5 million. While the group raised selling prices in November in view of rising pulp prices, its actual impact was felt only in January. Hence, the better sales were mainly driven by higher sales. Geographically, local sales jumped 9.4% y-o-y while overseas revenue grew by 8.2% y-o-y.
While the group has been aggressively promoting its sanitary napkins (+8.3% y-o-y) and baby diapers (+67.3% y-o-y) by offering competitive prices, the bulk of the revenue was still mainly driven by tissue product sales, which made up of 89.7% of its 9MFY11 revenue. On a quarter-on-quarter (q-o-q) basis, revenue grew 7.9% while net profit surged 27.3%.
Despite the higher sales, which would have helped NTPM achieve higher economies of scale, the lower cumulative net profit y-o-y was due to higher raw material prices. Prices of pulp, making up 80%-90% total raw material costs, rose 12.7% from the corresponding period previously. Accordingly, earnings before interest and tax (Ebit) margin narrowed from 20.3% in 9MFY10 to 17.3% in 9MFY11. Nonetheless, despite the higher pulp price q-o-q, Ebit margin improved by 1.9 percentage points q-o-q, driven mainly by the higher selling price imposed in November 2010, although the actual impact was only felt in January 2011.
To improve the quality of its products to maintain market share, the group currently uses 100% pulp to produce its pocket and facial tissue. We see margins in the following quarter staying at the current level after accounting for the higher selling price and stronger US dollar against the ringgit, which will collectively offset the seasonally lower sales and higher pulp prices.
We maintain our FY11 and FY12 earnings forecasts at RM50.5 million and RM58.9 million respectively. Our target price is maintained at 52 sen, based on 10 times FY12 EPS. Although year-to-date net profit was lower at RM40.5 million versus RM45.1 million in 9MFY10, the group has declared a single tier dividend per share of 1.45 sen, the same as that paid in 3QFY10. ' OSK Research, March 14
This article appeared in The Edge Financial Daily, March 15, 2011.
Company Name: NTPM HOLDINGS BHD
Research House: OSK
NTPM Holdings Bhd
(March 14, 54.5 sen)
Maintain neutral at 54.5 sen with target price 52 sen: NTPM's 9MFY11 results were within our full-year net profit forecast of RM50.5 million. Revenue grew 9.0% year-on-year (y-o-y) to RM315.8 million while net profit fell 10.4% y-o-y to RM40.5 million. While the group raised selling prices in November in view of rising pulp prices, its actual impact was felt only in January. Hence, the better sales were mainly driven by higher sales. Geographically, local sales jumped 9.4% y-o-y while overseas revenue grew by 8.2% y-o-y.
While the group has been aggressively promoting its sanitary napkins (+8.3% y-o-y) and baby diapers (+67.3% y-o-y) by offering competitive prices, the bulk of the revenue was still mainly driven by tissue product sales, which made up of 89.7% of its 9MFY11 revenue. On a quarter-on-quarter (q-o-q) basis, revenue grew 7.9% while net profit surged 27.3%.
Despite the higher sales, which would have helped NTPM achieve higher economies of scale, the lower cumulative net profit y-o-y was due to higher raw material prices. Prices of pulp, making up 80%-90% total raw material costs, rose 12.7% from the corresponding period previously. Accordingly, earnings before interest and tax (Ebit) margin narrowed from 20.3% in 9MFY10 to 17.3% in 9MFY11. Nonetheless, despite the higher pulp price q-o-q, Ebit margin improved by 1.9 percentage points q-o-q, driven mainly by the higher selling price imposed in November 2010, although the actual impact was only felt in January 2011.
To improve the quality of its products to maintain market share, the group currently uses 100% pulp to produce its pocket and facial tissue. We see margins in the following quarter staying at the current level after accounting for the higher selling price and stronger US dollar against the ringgit, which will collectively offset the seasonally lower sales and higher pulp prices.
We maintain our FY11 and FY12 earnings forecasts at RM50.5 million and RM58.9 million respectively. Our target price is maintained at 52 sen, based on 10 times FY12 EPS. Although year-to-date net profit was lower at RM40.5 million versus RM45.1 million in 9MFY10, the group has declared a single tier dividend per share of 1.45 sen, the same as that paid in 3QFY10. ' OSK Research, March 14
This article appeared in The Edge Financial Daily, March 15, 2011.
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