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Nestle India 1QCY2014 performance highlights and results update

May 23, 2014, Friday, 13:01 GMT | 08:01 EST | 16:31 IST | 19:01 SGT
Contributed by Angel Broking

For 1QCY2014, Nestle India (Nestle) reported a weak performance on the operating front, registering a meager 2.9% yoy growth on the top-line front (vs an estimated 9% yoy growth). The company posted a 7.1% yoy decline in its bottom-line.

Key highlights of the quarter: Nestle posted a 2.9% yoy growth in net sales to Rs.2,313cr. The domestic business (constituting 93% of overall sales) posted a decade-low sales growth of 3.4% yoy to Rs.2,167cr. The modest revenue growth was due to higher prices as volumes continued to remain under pressure. The export business declined by 4.4% yoy to Rs.146cr due to a higher base in the corresponding quarter of the previous year. The gross margin fell by 110bp yoy to 54%, due to increase in raw material costs. The OPM fell by 199bp yoy due to lower gross margin and a 130bp yoy increase in other expenses. The company’s bottom-line was down by 7.1% yoy impacted by a lower OPM. The company’s other income rose by 94.9% yoy to Rs.39cr. Depreciation too rose marginally by 2.2% yoy to Rs.84cr.

Outlook and valuation: We expect Nestle to post a top-line and bottom-line CAGR of 13.6% and 10.9% over CY2013-15. At the current market price, Nestle is trading at a rich valuation of 32.4x CY2015E EPS. Hence, we continue to maintain our Neutral view on the stock.