Mutual Funds Commodities Research Tax Planning IPO Our Team Contact Us  
Google
Web www.equitybulls.com
Research

| More

Nestle India - Capex announcement (Rs26bn over CY20-23) is the highlight - ICICI Securities

Posted On: 2020-10-25 23:47:49 (Time Zone: Arizona, USA)


Domestic revenue grew 10% in Q3CY20 (with ~7% volume growth (our view)), with double-digit growth in culinary (Maggi), chocolates (a positive surprise), coffee (as expected). Nestle seems to be in the sweet spot - (1) structural tailwind from increasing consumer propensity to consume packaged foods, (2) key input remaining stable and (3) significant increase in capex (Rs26 bn planned over CY20-23 which is = cumulative capex of CY12-19). Our long-term positive view is intact; however, our primary research (link) indicates likely lower birth rates in CY21, a potential headwind for its infant nutrition business in CY21. HOLD retained.

- Revenue momentum returns with improvement in supply situation: Revenue / EBITDA grew 10% / 16% YoY while recurring PAT declined 1% (due to lower tax rate in the base quarter). Domestic sales growth of 10% - we estimate ~7% volume growth. This strong performance was driven by improvement in supply situation and double-digit growth in brands - MAGGI Noodles, MAGGI Sauces, KITKAT, Nestlé MUNCH, NESCAFÉ CLASSIC & NESCAFÉ SUNRISE due to increased in-home consumption. Further, demand of out-of-home channels improved sequentially but continues to be impacted. Export sales returned to the growth trajectory (+9% YoY). E-commerce grew by 97% and contributes ~4% of domestic revenues.

- Margin expanded due to input cost deflation: Gross margin expanded 60bps to 57.9% driven by milk and milk derivatives price deflation (constitutes 51% of Nestlé's total COGS). Other expenses declined 130bps while staff cost was up 50bps. This translated into 130bps improvement in EBITDA margin, EBITDA grew 16% YoY. PBT grew 13% due to lower other income (down 30% YoY from lower yields and cash reserves post payment of special dividend in Aug'19).

- Capex announcement: Nestlé plans to invest Rs26bn over next 3-4 years towards construction of a state of art factory in Sanand, Gujarat and other facilities. A noodle factory is western India will potentially help it improve market shares (it has relatively weaker position in western India).

- Dairy prices to be deflationary for rest of CY20, likely into CY21: We note that milk procurement prices have declined 20% in April due to lower demand. We believe dairy prices are likely to be deflationary for the rest of CY20 and in 1HCY21, which together with price hikes of 3-4% in infant nutrition and 5% in Everyday dairy whitener in Dec'19 could improve margins (estimate +120bps margin expansion in CY20).

- Valuation and risks: We upgrade our earnings estimates by ~2%; modelling revenue / EBITDA / PAT CAGR of 12 / 17 / 15 (%) over CY19-21E. Maintain HOLD rating with DCF-based target price unchanged at Rs16,500. Key risks are consumption slowdown linked to economic performance and keyman risk.

Shares of NESTLE INDIA LTD. was last trading in BSE at Rs.15863 as compared to the previous close of Rs. 15911.25. The total number of shares traded during the day was 3205 in over 1461 trades.

The stock hit an intraday high of Rs. 16066.15 and intraday low of 15815.35. The net turnover during the day was Rs. 50953727.


Source: Equity Bulls

Click here to send ur comments or to feedback@equitybulls.com


Disclaimer:The article above is a gist / extract of the original report prepared by the research firm / brokerage firm. This article is not to be considered as an offer to sell or a solicitation to buy any securities. This article is meant for general information only. www.equitybulls.com, its employees or owners or the research firms, its employees or owners won't be responsible for any liability that may arise from information, errors or omissions in these articles. www.equitybulls.com or its employees or owners / the research firms or its employees or clients or owners may from time to time hold positions in securities referred in this article. For detailed research reports, please contact the concerned research firm directly.





Other Headlines:

Hindustan Unilever - Volume focus over margins continues - ICICI Securities

ICICI Prudential Life Insurance - Growing share of non ICICI bank channels a long term positive - ICICI Securities

Axis Bank - Conservatism to cushion earnings volatility; on road to superior returns - ICICI Securities

Emami - Good execution continues - ICICI Securities

Jyothy Labs - Beat on all counts; top BUY in midcap Consumer Staples - ICICI Securities

Greenpanel Industries - Volume growth and margin tailwinds to persist - ICICI Securities

Navin Fluorine International - FY22 could see steady growth - ICICI Securities

India Cements - High leverage remains key concern - Q3FY21 - ICICI Securities

3M India - CY21 guidance of parent: Focus on healthy revenue growth and FCF, but limited capex - ICICI Securities

JM Financial - Stress pool has peaked; earnings buoyed by distressed credit resolutions - ICICI Securities

Q3FY21 Result Update - Hindustan Unilever - ICICI Direct

Q3FY21 Result Update - Polycab India - ICICI Direct

Q3FY21 Result Update - Navin Fluorine - ICICI Direct

Q3 FY21 Result Update - Greenpanel Industries - YES Securities

Q3 FY21 Result Update - Axis Bank - YES Securities

Q3 FY21 Result Update - ICICI Prudential Life Insurance - YES Securities

Q3 FY21 Result Update - PSP Projects - YES Securities

Q3 FY21 Result Update - CANFIN Homes - YES Securities

Q3 FY21 Result Update - Nippon Life India Asset Management Ltd - YES Securities

HUL Q3FY21 results and investor call takeaways - YES Securities

Bank of Baroda - Q3FY21 First Cut - ICICI Direct

Company Update - Music Broadcast - ICICI Direct

Company Update - Saregama India - ICICI Direct

Sector Update - Auto - Green Tax impact - ICICI Direct

Jyothy Lab - Q3FY21 First Cut - ICICI Direct

Marico - Q3FY21 First Cut - ICICI Direct

Q3FY21 Result Update - Kotak Mahindra Bank - ICICI Direct

Hindustan Unilever - Q3FY21 First Cut - ICICI Direct

Q3FY21 Company Update - JK Tyres & Industries - ICICI Direct

Q3FY21 Result Update - Oberoi Realty - ICICI Direct

Mutual Fund Review - January, 2021 - ICICI Direct

Maintain BUY on Bajaj Auto - A strong show, encouraging outlook - HDFC Securities

Maintain ADD on Zensar Technologies - Margin reset, growth to catch up - HDFC Securities

Maintain BUY on Mphasis - Growth vectors intact - HDFC Securities

Maintain BUY on Larsen & Toubro - Marginal miss, bracing for recovery - HDFC Securities

Financial Services Sector Thematic Report - Megatrends - Re-bundling ahead - HDFC Securities

Q3 FY21 Results First Cut - Can Fin Homes - YES Securities

3Q investor call takeaways - Crompton Consumer - YES Securities

3Q investor call takeaways - Polycab India - YES Securities

Q3FY21 Result Update - V-Mart Retail - YES Securities

Q3FY21 Result Update - Kotak Mahindra Bank Ltd - YES Securities

Q3FY21 Result Update - Larsen & Toubro Ltd - YES Securities

Supreme Industries - Beat on all counts - Q3FY21 - ICICI Securities

Larsen & Toubro - Healthy margins, metro impacts cashflows - ICICI Securities

V-MART - Better placed among peers - ICICI Securities

Oberoi Realty - All eyes on upcoming launches - ICICI Securities

Kotak Mahindra Bank - Fuelling the secured growth engine; stress pool on anticipated lines - ICICI Securities

Q3FY21 Company Update - Music Broadcast - ICICI Direct

Q3FY21 Result Update - JSW Steel - ICICI Direct

Gladiator Stocks - Bajaj Finserv - ICICI Direct



Website Created & Maintained by : Chennai Scripts
West Mambalam, Chennai - 600 033,
Tamil Nadu, India

disclaimer copyright © 2005 - 2020