Limited upside forecast for Nestle Malaysia

PETALING JAYA: Nestle (M) Bhd’s valuations are stretched, suggesting that near-term upside is largely priced in, according to MBSB Research.

The research house, which downgraded its rating to “sell”, said the Nestle stock is trading at a price-to-earnings multiple of 58.26 times – well above its three-year average.

“We maintain our target price (at RM94.50) based on a dividend discount model valuation with an unchanged, consistent 3.2% growth, and an unchanged weighted average cost of capital of 6.1%,” it said in a note yesterday.

Meanwhile, MBSB Research also said that it has maintained its earnings forecasts, following the settlement of a seven-year legal dispute between Nestle’s subsidiary, Nestlé Products Sdn Bhd, and Mad Labs Sdn Bhd.

Nestle has confirmed that the settlement will not have any material impact on the group’s financial performance or operations. MBSB Research views the resolution as non-disruptive to Nestle’s underlying fundamentals and ongoing business activities.

The legal dispute between Nestlé Products and Mad Labs dates back to 2019, when Mad Labs alleged the unauthorised use of its QR code technology on Nestle products.

The claim followed a 2018 incident in which QR codes on certain Maggi products redirected users to inappropriate content, triggering the police’s and the Malaysian Communications and Multimedia Commission’s involvement.

Mad Labs subsequently sought RM139.34mil in damages and an injunction.

Although the High Court dismissed Mad Labs’ damages claim in 2023, it ruled that Mad Labs retained control of the QR code and was entitled to compensation for its unauthorised use, prompting Nestle to file an appeal.

However, both parties have now mutually agreed to settle the dispute.

During a High Court session on Nov 17, Nestle and Mad Labs jointly recorded a full and final settlement, including the withdrawal of all claims and any pending appeals before the Court of Appeal.

The terms include each party bearing its own legal costs.

Looking ahead, MBSB Research said Nestle’s management expects growth momentum to remain firm into financial year 2026.

This will be supported by sustained export strength, easing input costs and continued fiscal support for consumers.

“The recently announced Budget 2026 allocations to Sumbangan Tunai Rahmah and Sumbangan Asas Rahmah (Sara), with the next Sara payment scheduled for February 2026, are expected to further reinforce household spending and carry domestic demand strength into the new financial year.”