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Dolat Capital Report
Nestle India Ltd.'s Q1 CY23 results exceed our estimates. The company reported 21.2% YoY growth in the domestic market driven by healthy volume and mix led growth while exports business posted 24.9% YoY increase.
Nestle India posted highest revenue growth in past 10-years (excluding growth in Q3 CY16).
On a three-year compound annual growth rate basis, revenues increased by 13.3% - indicates acceleration in overall growth. E-commerce channel continues to maintain strong growth fueled by new formats - ‘quick commerce' and ‘click and mortar'. Growth in organised channels was supported by outlet expansion.
Gross margin decline by 160 basis points YoY mainly attributed to higher inflation in cost of fresh milk, fuels and green coffee. However, edible oils, wheat and packaging material costs have witnessed early signs of softening.
Nestle India's Q1 CY23 results were ahead of our estimates. Hence we have increased our CY23/24E earnings per share estimates to factor in increased demand for the company's products.
As the company has leadership position and unique positioning in most of the categories, we believe that its growth rate would remain high.
Further, Nestle's margins would improve gradually with softening in most of the commodity prices but high inflation in milk prices remains a concern.
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