MALAYSIA: Nestlé (Malaysia) Bhd, a traditionally resilient stock, has experienced a sharp downturn, with its share price plunging 32.08% year-to-date (YTD) and dipping below RM100 (S$30) for the first time in years. The stock, which started in 2025 at RM99.94, now trades at RM64.82, raising concerns among investors and analysts alike.
Despite this steep drop, Nestlé Malaysia still trades at a premium valuation compared to its industry peers. According to The New Straits Times (NST), analysts note that the company’s price-to-earnings (P/E) ratio remains significantly elevated, even after the decline.
Tradeview Capital fund manager Neoh Jia Man told Business Times that despite Nestlé Malaysia’s stock falling more than 45% over the past year, it still trades at 32.8 times the consensus earnings for the financial year 2025 (FY25), which is more than double the industry average of 15.0 times. However, he pointed out that Nestlé has historically commanded such a valuation premium due to its strong brand equity and market leadership.
Rising costs and shifting consumer trends weigh on performance
Several key factors have contributed to Nestlé Malaysia’s share price slump. Rising commodity costs, particularly for coffee beans and cocoa, have placed pressure on margins, making it challenging for the company to fully pass on cost increases to consumers.
Neoh highlighted that weaker consumer purchasing power has led to “downtrading,” where shoppers opt for cheaper alternatives instead of Nestlé’s traditionally premium-priced products. This trend, combined with changing consumer preferences towards healthier alternatives and increased competition from smaller brands leveraging e-commerce, has intensified pressure on the company’s market position.
Additionally, the broader consumer products sector has also seen declines. According to NST, Dutch Lady Milk Industries Bhd has fallen 7% YTD, Fraser & Neave Holdings Bhd dropped 14%, Farm Fresh Bhd slipped 6%, and Berjaya Food Bhd, which operates Starbucks in Malaysia, declined 10%.
Another factor weighing on Nestlé Malaysia’s performance is an ongoing consumer boycott. While the full extent of the boycott’s impact remains unclear, it has been cited as a contributing factor to weaker demand for Nestlé products.
Neoh suggested that a reduction in the boycott and a decline in commodity costs could provide upside potential for the company. However, he cautioned that long-term structural challenges, such as competition from challenger brands and evolving consumer preferences, could continue to pose risks.
Social media reactions reflect mixed sentiment
Public sentiment surrounding Nestlé Malaysia’s share price decline has been divided, with some consumers linking it to the boycott, while others attribute the drop to overvaluation and market trends. One Facebook user stated, “I already (boycotted) Nestlé products since October. Not sure if anyone else shares the same point of view, but there are plenty of alternatives to Nestlé products.” This aligns with reports that some Malaysian consumers have actively avoided Nestlé products.
Others, however, dismissed the boycott as a primary reason for the stock’s decline. One commenter wrote, “Is Nestlé really under boycott? I think it’s more due to competition.” This perspective suggests that structural issues such as rising costs and changing market dynamics play a significant role as well.
Investment concerns were also raised, with one user remarking, “Overvalued and dividend yield too low. So the share price will fall..” Another noted, “This company’s products are no longer cheap,” highlighting affordability concerns among consumers.
The mixed reactions reflect the broader uncertainty surrounding Nestlé Malaysia’s future. While brand strength and market leadership remain key assets, the company must navigate significant headwinds to regain investor confidence.
Can Nestlé Malaysia recover?
Looking ahead, analysts believe Nestlé Malaysia’s ability to recover will depend on its capacity to sustain organic growth and adapt to shifting market trends. Neoh noted that a sustained recovery in sales, alongside easing commodity prices, could support a re-rating of the stock.
According to NST, CIMB Securities expects consumer companies to post strong sales in the first half of 2025, driven by festive demand and rising incomes. However, spending is projected to weaken in the second half, which could lead to lower earnings momentum.
For now, Nestlé Malaysia remains a premium stock, but whether its valuation is justified in the face of changing consumer behaviour, higher costs, and geopolitical factors remains a pressing question for investors.
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