Nestle India - Margin jumps, growth to return... - ICICIdirect

Nestlé India (NIL) posted 20.8% YoY increase in earnings driven by significant improvement in margins to 22.8% (higher 233 bps YoY), with sales growth remaining moderate at 10.1% (I-direct estimate: 13.6%). We believe that with the company's capacity expansion in place and new facilities to roll out production in full swing from CY13 onwards, NIL's sales growth would gain traction. Though sales growth witnessed a moderation in CY12, we believe the revival in economic growth and increasing penetration of packaged foods in the country would further aid sales to grow at 15.6% CAGR in CY12-14E.

Also, with no further capex plans we expect incremental cash flows to be directed towards loan repayment and a higher dividend payout. We recommend BUY rating and maintain our target price of Rs. 5074.

Source : Equity Bulls

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