Nestle: Margins expand 210 bps due to price increases
- Overall sales grew just 12.7% v/s an estimate of 22%. Domestic sales grew 13.7%, but exports declined 1.1% despite sustained INR depreciation. EBITDA grew 24.7%, as margins expanded 210bp, despite ~140bp increase in other expenses and 60bp increase in staff cost.
- Motilal Oswal estimates flat-to-negative volume growth in the domestic business, impacted by changes in the product portfolio and channel rationalization.
- Gross margin expanded 400bp YoY due to (1) higher prices, (2) improved channel mix, and (3) Rs depreciation.
- The company booked Rs220m as interest cost; total borrowing during the quarter was $35m and total loan from Nestle SA stands at $192m. INR depreciation led to an MTM loss of Rs978m, of which Rs167m was charged in the P&L and the rest was added to fixed assets.
- Nestle announced its first interim dividend of 2012 at Rs18/share.
Outlook: Motilal Oswal will review their estimates post 3QCY12, as they believe the company would no longer enjoy the low base in margins; also they expect the company to focus on volume growth. The stock trades at rich valuations of 36.1x CY12E and 30x CY13E EPS. Maintain Neutral.
Click here to read the full report
Motilal Oswal was founded in 1987 as a small sub-broking unit, with just two people running the show. Today it has a 2000 member team with a networth of Rs7 bn and market capitalization as of March 31, 2008 at Rs19 bn.
For more information please write in to email@example.com
Disclaimer: The author has taken due care and caution to compile and analyse the data. The opinions expressed above are only the views of the author, and not a recommendation to buy or sell. Neither the author nor IndiaNotes.com accept any liability whatsoever arising from the use of any of the above contents.
- Nestle: Net profit ramps up by 6.07% to Rs2878.60 mn, buy
- Neutral On Nestle India
- Nestle India quarter update: Results well below expectations
- Nestle India: Sales growth to remain benign; strong growth expected for Pidilite Industries in Tier 2/3 cities
- Nestle India: Domestic volumes subdued; growth at multi-year low, maintain neutral
Have a question?