FREE Stock in Focus: Monde Nissin Corp. (MONDE) – 5 Dec 2024 by AP Securities

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Summary of Broker’s Recommendation

We continue to recommend a BUY for MONDE given recent earnings progressions alongside the company’s growth potential on the back of improvements, both internally (additional capacity, cost efficiencies) and externally (moderating inflation, wage hikes). Upside remains substantially high at 34.0% towards consensus Target Price of P12.33.

Analysis and Opinion

Earnings recap

MONDE’s 3rd quatrer (3Q) 2024 earnings beat estimates on the continued sequential expansion in margins for their APAC BFB segment as a result of improved manufacturing efficiencies, lower commodity costs, and a more favorable product mix. We note that this outperformance was achieved despite the continued weakness for their Meat Alternative Business (MAB), which saw revenues decline by 6.5% YoY as demand remained soft.

New products

We attended a MONDE-initiated event on Tuesday wherein we got the opportunity to taste their products before then proceeding with the Q&A, which is what we will be focusing on right now. First off, MONDE recently launched two products, namely Goodnom (packaged coconut milk) and Nuvi (chocolate milk drink with nata de coco). The company mentioned that even though Goodnom has only been in the market for 2 months, sales are doing quite well.

Additionally, MONDE also mentioned that household penetration for the packaged coconut industry remains significantly low at only 9%, so the launch of Goodnom would put them in a significantly advantageous position to take up market share in this segment while also spearheading growth in the following years. Nuvi, on the other hand, is currently experiencing some challenges as management mentioned that an extensive amount of effort will have to be exerted in order to significantly penetrate the market as competitors such as Nestle’s Chuckie essentially dominate the chocolate drink space.

It’s all coming back again

Biscuits continue to be a substantial revenue contributor for MONDE as it accounted for an average of 34% of APAC BFB revenues for the past three years. MONDE recognized that Skyflakes, one of their main biscuit offerings, is priced at a premium versus competitors which resulted to a significant impact on this segment’s revenue in the previous periods of high inflation due to consumers downtrading to cheaper brands. On the flip side however, moderating inflation and the recent successive wage increases could translate to improving sales for this segment.

Noodles domination

MONDE’s noodles continued to dominate, accounting for 67.3% of the total noodles
market as of 3Q 2024. Moving forward, management will continue to expand this segment strategically through their Buy Big (Kasalo packs) and Buy More (Multi packs) programs on expectations of consumer spending growth in the following years. To add, the company is currently onboarding new multipack capacity, with a multipack machine currently expected to be operational this December. Lastly, MONDE stated that their Noodles segment had particularly good sales for October and an even better November. Given this, we expect earnings for this quarter to either remain in-line, with a slight possibility to beat estimates once again.

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