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HDFC Securities Institutional Equities
Nestle India Ltd. reported a miss on revenue while the margin was ahead of expectations. Domestic revenue was up by 14/15% YoY in Q4/CY22, delivering a three-year compound annual growth rate of 11%. However, Nestle witnessed ~2% YoY volume contraction in Q4 due to sustained inflation impacting demand in the semi-urban market (mainly low unit packs).
Volume deceleration was sharp as the company posted 8% volume growth in nine months-CY22. Most packaged food companies delivered similar price-led healthy revenue growth with weak volumes.
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Gross margin improved by 200bps QoQ but continued to contract by 200 basis points YoY to 55% (59% two years back). Cost control protected the Ebitda margin, which was up 20 bps YoY to 23.4%, after contracting for the last five quarters.
Ebitda grew by 14.5/6% YoY in Q4/CY22. Nestle continued to focus on distribution strengthening, category expansion and capacity building (capex of Rs 50 billion planned for the next three years).
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