Q1CY21 Result Update - Nestlé India - ICICI Direct

Nestlé India (NIL) reported a healthy set of numbers with 8.6% revenue growth contributed by 10.2% domestic sales growth. Some brands like Maggi Noodles, KitKat, Nescafe Classic, Milkmaid, Maggi Sauces & Masala-Ae-Magic witnessed strong double digit growth. Post pandemic, e-commerce channel has been growing strongly for the industry and remained prominent growth channel with 66% growth in Q1 for the company. It is contributing 3.8% to sales. Gross margins expanded 223 bps mainly due to lower milk prices. It is important to note that milk procurement prices in base quarter saw exorbitant increase. Employee spend was lower by 58 bps (as percentage to sales) whereas overhead spends were up 131 bps (as percentage to sales). Operating profit increased 17.3% to Rs. 930.6 crore. Operating margins increased 191 bps to 25.8%. PAT increased 14.6% to Rs. 602.2 crore. The company declared an interim dividend of Rs. 25/share.

Valuation & Outlook

NIL has been able to grow at a consistent pace in the last four years. However, volume growth has moderated to 2.6% in CY20. We believe certain supply constraints during peak of the pandemic and relatively smaller presence in rural regions impacted growth last year. However, we believe the company is well placed to capture the growth now with increasing rural presence and capacity addition in existing categories. We believe NIL would be able to maintain dividend-payout of ~80%. The stock is trading at premium valuation multiples at 67x CY21E & 60x CY22E. We maintain our HOLD recommendation with a revised target price of Rs. 19300/share (earlier TP: Rs. 18000).

Shares of NESTLE INDIA LTD. was last trading in BSE at Rs.17086.25 as compared to the previous close of Rs. 17090.35. The total number of shares traded during the day was 3872 in over 1576 trades.

The stock hit an intraday high of Rs. 17371.5 and intraday low of 16885.5. The net turnover during the day was Rs. 66257321.

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_Nestle_Q1CY21.pdf

Source : Equity Bulls

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