Nestle India - 3QCY2012 Result Update - Angel Broking

For 3QCY2012, Nestle India (Nestle) reported a weak performance, both on the top-line and the bottom-line front. The top line growth at 7.8% yoy to Rs.2,116cr was the lowest in the past several quarters with volume growth under pressure. The net profit grew by 2.3% yoy to Rs.267cr.

Key highlights during the quarter: Domestic sales grew by 7.6% yoy. Exports to third parties grew by 29.7%, while exports to affiliates declined by 4.7% yoy. INR depreciation impacted the growth in sales favorably by 11.6%. Sales growth was affected due to portfolio optimization and pricing for value in certain products. Gross margins improved by 255bp yoy despite higher input costs due to better realization and superior product mix. Employee costs as a percentage of sales increased by 65bp on a yoy basis. Other expenses as a percentage of sales too rose by 155bp on a yoy basis. Thus, the OPM remained flat at 21.0%. Depreciation too rose by 86.8% on a yoy basis due to capacity addition carried out by the company. However, the bottom-line was boosted by reversal of Rs.17.9cr (Rs.12cr net of tax) relating to exchange differences arising out of interest on foreign currency borrowings pertaining to previous periods (year and quarter) due to change in the accounting policy.

Outlook and valuation: We expect Nestle to post a top-line and bottom-line CAGR of 16% and 14.2% over FY2012-14E. At the current market price, Nestle is trading at rich valuations of 34.2x CY2013E EPS. Hence, we continue to maintain our Neutral view on the stock.

Source : Equity Bulls

Keywords