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Prabhudas Lilladher Report
We increase CY23/24 earnings per share estimates of Nestle India Ltd. by 1.6%/0.7% following strong revenue performance with 5% volume growth (excluding low unit packs Maggi 11-12%).
However, we trim our gross margin estimates by 50 basis points/20 bps in CY23/24 as rising prices of milk (~40% of raw material basket) might delay margin recovery.
Growth momentum remains intact across large metros and rural markets with growth across all channels like modern trade, out-of-home and e-commerce. Medium to long term growth drivers remain intact, led by-
sustained expansion in rural reach (~ 20% of sales),
availability of capacity in Maggi post expansion,
huge scope of growth in segments like coffee, ready-to-drink and chocolates and
channels of future like e-commerce as well as newly launched direct-to-consumer website platform - mynestle.in.
Nestle India is expected to gain from lower costs of palm oil, but firm prices of milk, fuel and coffee will curtail gains. However as margins in Q2 FY22/Q3 FY22 were lower by 130/260 bps than Q1 FY22 levels, expect QoQ margin expansion in next two quarters.
We factor in Ebitda margin improvement of 100 bps in CY23 and 150 bps over CY22-24. We estimate 18.0% profit after tax compound annual growth rate over CY22-24. We expect moderate returns given rich valuations of 58.8 times CY24 earnings per share.
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More Research Reports On Nestle India's Q1 CY23 Results Review
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