Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Nestlé India Limited
Neutral
NEST.BO, NEST IN
Good start to 2011
• Impressive performance once again. Nestle India reported net sales,
EBITDA and adjusted PAT of Rs18.1bn (+22% y/y), Rs3.9bn (+27%
y/y) and Rs2.6bn (+33% y/y) for Q1CY11. While revenue growth was
2% ahead of our estimates, EBITDA and PAT came in 6-7% ahead of
our expectations.
• Strong domestic sales growth at 23% y/y supported by healthy volume
growth, better mix and price increases (more aggressive starting
2HCY10). Export sales grew 10% y/y.
• Gross margin expansion (+100bp y/y) continues supported by
aggressive price hikes, better product mix & channel mix (lower sales to
CSD we believe) and lower levels of promotions. EBITDA margins
expanded 80bp y/y as gross margin gains were offset by 30bp increase
in other expenses (as % of sales) which were pushed up by special
charges related to re-design of factory layout. While raw material
inflation and volatility remains a key challenge, we believe price
increases, favorable mix and better SG&A leverage will help margins
going forward.
• Best play on packaged foods with diversified product base and
dominant shares in most categories. We expect healthy revenue growth
rates to continue aided by new capacity commissioning over the next 1-2
years. Premium products should provide the next leg of growth. While
Nestlé’s PPP strategy continues to generate healthy demand, it is now
looking to augment its premium product portfolio and will leverage the
wide product offerings of its parent to do this.
• Our view: Our earnings estimates remain largely unchanged as better
margin gains are offset by higher tax rate. Tax rate will likely rise as
100% tax holiday at Pantnagar facility drops to 30% starting Apr’11.We
roll forward our target price to Mar’12 and set it at Rs3750. While we are
positive on the company’s growth potential, the current valuation of 35x
CY11E and 29x CY12E P/E looks fair to us; we would wait for better
entry points.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Nestlé India Limited
Neutral
NEST.BO, NEST IN
Good start to 2011
• Impressive performance once again. Nestle India reported net sales,
EBITDA and adjusted PAT of Rs18.1bn (+22% y/y), Rs3.9bn (+27%
y/y) and Rs2.6bn (+33% y/y) for Q1CY11. While revenue growth was
2% ahead of our estimates, EBITDA and PAT came in 6-7% ahead of
our expectations.
• Strong domestic sales growth at 23% y/y supported by healthy volume
growth, better mix and price increases (more aggressive starting
2HCY10). Export sales grew 10% y/y.
• Gross margin expansion (+100bp y/y) continues supported by
aggressive price hikes, better product mix & channel mix (lower sales to
CSD we believe) and lower levels of promotions. EBITDA margins
expanded 80bp y/y as gross margin gains were offset by 30bp increase
in other expenses (as % of sales) which were pushed up by special
charges related to re-design of factory layout. While raw material
inflation and volatility remains a key challenge, we believe price
increases, favorable mix and better SG&A leverage will help margins
going forward.
• Best play on packaged foods with diversified product base and
dominant shares in most categories. We expect healthy revenue growth
rates to continue aided by new capacity commissioning over the next 1-2
years. Premium products should provide the next leg of growth. While
Nestlé’s PPP strategy continues to generate healthy demand, it is now
looking to augment its premium product portfolio and will leverage the
wide product offerings of its parent to do this.
• Our view: Our earnings estimates remain largely unchanged as better
margin gains are offset by higher tax rate. Tax rate will likely rise as
100% tax holiday at Pantnagar facility drops to 30% starting Apr’11.We
roll forward our target price to Mar’12 and set it at Rs3750. While we are
positive on the company’s growth potential, the current valuation of 35x
CY11E and 29x CY12E P/E looks fair to us; we would wait for better
entry points.
No comments:
Post a Comment