• Maintain BUY (TP: RM0.63). Nova Wellness (Nova)’s FY24 top-line declined by 10.3% YoY on the back of lower revenue from house brand (-7% YoY) and OEM (-33% YoY). Consequently, the group reported a 44.4% YoY decline in FY24 core net profit to RM8.3mn, compounded by higher OPEX due to (i) higher administrative expenses by 3.4%, and (ii) higher other operating expenses by 135%, mainly due to provisions for doubtful debts, stock obsolescence, and R&D cost amortization. Overall, the group’s bottom-line was below ours and consensus expectations, accounting for only 58% and 64% respectively. The deviation against our projection was mainly due to lower-than-expected sales volume as well as higher-thanexpected operating expenses. Maintain a BUY call with a lower TP of RM0.63 (from RM0.68) based on Nova’s FY25F EPS of 4.4sen, pegged to a PER of 14.3x (-0.5SD its 5-year historical forward PE).

• Key highlights. Despite higher revenue contribution from house brand (19.3 YoY), its core net profit experienced a decline of 82.6% YoY primarily due to a higher administrative expenses (+20% YoY) and other operating expenses (>100% YoY).

• Earnings Revision. We revised our FY25-27F earnings forecast down by 21.7%, 25.9%, and 29.0%, respectively, as we reduce projected sales volumes and increase operating expense assumptions for respective fiscal years.

• Outlook. We expect Nova's earnings to benefit from its intensified marketing strategy. However, the group’s margins may face pressure due to higher material costs driven by fluctuations in foreign currency exchange rates. Despite this, we anticipate some relief in material costs next year as the MYR is expected to strengthen. Our economist projects the MYR to appreciate against the USD, reaching RM4.45 in 2025, compared to RM4.59 in 2024. Aside to that, Nova’s share price has declined by 30.3% YoY. Hence, we maintain our BUY recommendation based on the price weakness.

Source: BIMB Securities Research - 2 Sept 2024