Nestle India Q4 Results Review - Growth Falls Short Of High Standards: Systematix

"NDTV Profit’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages, asset managers and research agencies. These reports offer NDTV Profit’s subscribers an opportunity to expand their understanding of companies, sectors and the economy..Systematix Research Report.Nestle India Ltd. reported lower than expected topline growth, however profit after tax growth was above expectation. Revenue/Ebitda/profit after tax growth stood at 8.1%/ 11%/18.9%. Reported growth was broad-based across key brands, with volume growth of ~5% as per our estimate with the rest contributed by pricing and mix. Domestic sales grew 8.9% YoY led by strong growth in core brands, targeted brand spends and traction in alternate channels like out of home, e-commerce and rurban expansion. Gross margins improved sharply by 374 basis points with moderation in raw material prices and continued premiumization while Ebitda margins improved 63 bps due to a sharp increase in other expenses especially brand spends. The core brands seem to be responding well to the marketing and distribution initiatives of Nestle India and strong execution is visible on the OOH and rurban initiatives. The innovation pipeline continued to churn out new launches under Maggi, milk products and nutrition and confectionary..We expect Nestle’s continued dominance in its core categories, diversified portfolio and aggressive innovation/renovation initiatives to drive penetration-led growth. The company's low rural salience (~20%), category tailwinds and low penetration levels, lesser competitive intensity and global parent support will likely help drive continued outperformance. Margins have seen a strong recovery in CY23 and new launches in categories like nutritional supplements, pet care, canned beverages and breakfast cereals should add new growth avenues. We cut our estimates for CY24/25 to factor in lower growth and now build in revenue/PAT CAGR of 12%/14.2% over CY23-26E for the company, and value Nestle India at a price/earning of 65 times (in line with its five-year average) FY26 earnings to arrive a target price of Rs 2,730 (Rs 2,760 earlier). We revise our rating to Hold from Buy, given the recent outperformance coupled with near-term volume growth headwinds leaving little room for multiple re-rating or earnings upgrades. Robust free cash flow generation and liberal dividend payouts should help sustain the high return ratios and support best-in-class multiples..Click on the attachment to read the full report:.Nestle India Q3 Results Review - Sales Below Expectations Despite Weak Base: Nirmal Bang.DISCLAIMERThis report is authored by an external party. NDTV Profit does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of NDTV Profit..Users have no license to copy, modify, or distribute the content without permission of the Original Owner."

Nestle India Q4 Results Review - Growth Falls Short Of High Standards: Systematix

Increased brand spends to help revive volume growth

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Increased brand spends to help revive volume growth

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