Buy Nestle India - Q4 FY 2011 Result Update - Motilal Oswal

Nestle India (NEST IN; Mkt Cap USD8.3b, CMP Rs3,829, Buy)

Domestic sales posted a strong 23.1% growth, led by a mix of healthy volume growth and price increases. Exports grew by just 10.2%.

The management had indicated another round of price increases in 2QCY11, which is likely to further accelerate domestic revenue growth.

Gross margin expanded by an impressive 100bp to 51.2%, led by improved product and channel mix and reduction in promotional activities.

EBITDA grew 26.7% and EBITDA margin expanded 80bp to 21.3%, despite 24% increase in other expenditure.

Other income increased by 39.6% due to higher yields. Tax rate for the quarter declined 200bp to 28%. Reported PAT increased by 26.7% to Rs2.56b.

Nestle continues to outperform expectations despite an unfavorable input cost environment and steadily increasing competition. Our estimates factor in volume growth of 16.6% in CY11 and 19% in CY12. e are increasing our EPS estimates by 4% from Rs103.3 to Rs107.4 for CY11 and by 1.5% from Rs125.5 to Rs127.4 for CY12. The stock trades at 35.6x CY11E and 30.1x CY12E EPS. Maintain Buy.

Source : Equity Bulls

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