4Q21 earnings outperformed
Maintain BUY with higher DCF-TP of MYR27.10
4Q21 results were ahead of our/consensus expectations largely on its cost management initiatives. Outlook remains positive with expectations for industry volume growth to be strong in FY22 in absence of further nationwide lockdowns and further easing in pandemic restrictions. Our DCF-TP is raised to MYR27.10 (WACC: 7%, LT growth: 3%) in light of FY21’s earnings outperformance but we leave FY22-FY24 earnings estimates unchanged. Maintain BUY with decent yields of c.5%.
FY21 core net profit: +40% YoY; DPR: 100%
4Q21 core net profit of MYR96m (+41% YoY, +88% QoQ) brought FY21 core net profit to MYR246m (+40% YoY), above expectations at 109%/108% of our/consensus full-year earnings estimates. The beat was mainly due to higher-than-expected cost management initiatives. FY21 revenue of MYR2b was in-line, at 102% of our full-year estimates. HEIM also declared a final DPS of 66sen (YTD: 81sen, DPR: 100%).
Volume growth from pent-up demand
HEIM’s 4Q21 revenue grew 33% YoY on higher sales volume growth which was driven by: (i) eased movement restrictions, (ii) product price hikes, and (iii) a combination of restocking activities post- lockdown, and inventory front-loading for Chinese New Year. 4Q21 EBIT however grew by a wider 83% YoY due to cost management initiatives and growth in higher margin premium category volumes (4Q21 EBIT margin: +4.9 ppts YoY). On a QoQ basis, revenue increased by 78% QoQ mainly from the absence of operational disruption (3Q21: 11-week brewery suspension) and seasonally higher sales volume during the year-end festive season.
Positive outlook intact
Our FY22-FY24 earnings estimates remain unchanged as we have already imputed for strong industry volume growth of 10% YoY premised on robust growth in both on and off-trade sales. Once international borders reopen, this should also drive overall sales volume upwards but will partially be hindered by spikes in COVID-19 cases upon the discovery of new virus variants intermittently. Meanwhile, if raw material prices continue to rise, we expect HEIM to pass on additional costs to consumers in order to defend its margins going forward.