Nestle India Q1 Results Review - Beat On Growth, Resilient Margins Merit Outperformance: Systematix

Systematix Research Report

Nestle India Ltd. reported better-than-expected broad-based revenue growth and a resilient margin performance in Q1 CY23, despite the expected impact of raw material inflation. Significant improvement in pricing and mix aided the 21.3% YoY growth in revenue, implying mid single-digit (~6%) growth in volumes.

Ebitda and profit after tax surged 19.7%/25.8% YoY, with strong cost controls offsetting the hit on gross margin, thereby limiting the impact on Ebitda.

Growth saw a boost from ecommerce, accelerated by significant growth in quick commerce, new initiatives in out of home channel, which led to secular growth across brands, geographies and channels, and exports reporting strong double-digit growth through mainstream and ethnic channels.

Despite the negative impact of Maggi small pack decline, volume performance was sturdy, resulting in the company posting a 10-year high quarterly sales growth; both mega cities and smaller towns/rural recorded strong growth.

Margins could remain under pressure near-term, but softening prices of some commodities, improving premiumisation trends and cost efficiencies should help offset the pressure.

We expect Nestle India’s continued dominance in its core categories, diversified portfolio and aggressive innovation initiatives to drive penetration-led growth.

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