Nestle India Q1 Results Review - Robust Growth Across Categories: ICICI Direct

ICICI Direct Report

Nestle India Ltd. reported robust growth across segments. Sales were up 21.3% YoY led by a mix of volume and pricing growth.

Ebitda was at Rs 1095.5 crore, up 18.5% YoY with margins at 22.8%. Adjusted profit after tax was at Rs 736.6 crore (up 23.9% YoY).

Key triggers for future price performance:

• The company is undertaking a capex of Rs 5000 crore in the next three years to expand the capacity of its existing products. Many of its plant’s capacity utilisation has reached their peak.

• Nestle India is increasing its rural footprint from 80,000 villages to 1.2 lakh villages in the next two years. We believe distribution expansion in rural India (contributes 20% to sales) is driving growth in core categories.

• Palm oil, crude and wheat prices have declined significantly from their peak. Milk and coffee prices have remained elevated and would continue to remain firm in CY23. However, we believe gross margin has bottomed out in CY22. We expect a 260 basis points gross margin expansion in the next two years.

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