Maintain HOLD with an unchanged TP of MYR0.23

INNATURE’s 3Q24 results were within expectations. Group earnings should come in stronger in subsequent quarters on the back of higher sales momentum during the festive season, along with better consumer spending in FY25E. Our earnings estimates, TP of MYR0.23 (based on 16x FY25E PER, -1SD to mean) and HOLD call are unchanged. We prefer AEON MK (BUY, CP: MYR1.50, TP: MYR1.95) in the Consumer sector.

Results were in-line

INNATURE’s 3Q24 net profit of MYR1m (+2% YoY, -26% QoQ) brought 9M24 net profit to MYR5m (-16% YoY). The latter reflected 70% of both ours and consensus full-year earnings estimates – within expectations given our expectations for a stronger 4Q24 earnings on higher consumer spending.

Higher product costs dragged 3Q24 earnings

INNATURE’s 3Q24 revenue eased -2% YoY given weaker consumer spending at their retail beauty outlets (The Body Shop), but partially mitigated by its newly consolidated F&B business (Burger & Lobster) this quarter. 3Q24 retail revenue accounted for 89% of 3Q24’s group revenue, followed by F&B at 11%. Group pre-tax profit fell by a wider -25% YoY (PBT margin: - 1.3 ppts YoY) due to lower gross profit margin of 65.6% (vs. 68.5% in 3Q23) on higher cost of goods and A&P expenses.

No change to earnings estimates

We keep our earnings estimates. INNATURE should experience seasonally higher sales volume at both its retail beauty and F&B outlets in 4Q24 during the year-end festivities. Our expectations for an uplift in consumer spending following the civil service salary increase (Dec 2024) and minimum wage increase (Feb 2025) should also benefit INNATURE in FY25E.

Source: Maybank Research - 27 Nov 2024