Osim International to face continued cost pressures after disappointing 3Q14

Analyst profit forecasts tank by double digits.

Osim International has revealed disappointing results for the third quarter of 2014, falling short of consensus expectations, as revenue grew a measly 3.4% while PATMI slid 27.8% to S$16.4m.

The road ahead looks bleak for Osim as it faces cost pressures, which led OCBC Investment Research to slash PATMI forecasts by 15.4% and 19.9% in FY14 and FY15, respectively.

Here's more from OCBC Investment Research:

OSIM International Ltd (OSIM) announced a set of disappointing 3Q14 results which fell short of ours and the street’s expectations. Revenue grew 3.4% YoY to S$158.2m but PATMI tumbled 27.8% to S$16.4m. Management attributed this to the general market weakness, coupled with higher start-up expenses and legal costs from TWG-Tea’s expansion. Looking ahead, we expect cost pressures to persist in the near future and slash our FY14 and FY15 PATMI forecasts by 15.4% and 19.9%, respectively. We also cut our fair value from S$3.21 to S$1.90 after rolling forward our valuations to 14x FY15F EPS (previously 20x blended FY14/15F EPS). Although OSIM’s share price has plunged 18.0% since it reported its results, we believe the weak sentiment and lack of near-term catalysts may cap its upside potential. Hence, we downgrade OSIM to HOLD.