Kickstarting the earnings season for the FMCG sector, Nestle India is expected to maintain strong growth momentum with net profit jumping as high as 20.7 per cent on-year for the fourth quarter of FY2023. The FMCG major had recorded net profit of Rs 628.06 crore in the previous quarter of FY23, and Rs 594.71 crore for the fourth quarter of FY22. Nestle India is estimated to record a sales growth in double digits, in the range of 11.7- 14.5 per cent, led by a mix of volume and pricing growth.
“Nestlé India is expected to maintain strong growth momentum with 12.8 per cent sales growth led by a mix of volume and pricing growth. Maggi noodles and chocolate categories are expected to grow at faster pace but milk and related product categories to see moderate sales given high milk prices are adversely impacting growth,” said ICICI Securities. Nestle India is due to announce its January-March quarter results on Tuesday, April 25. The company follows a January to December accounting year.
Meanwhile, revenue growth is expected to be at 12 per cent on-year, which would be largely price-led (low single digit volume growth), said Sharekhan. Nestle India, similar to previous quarters, is expected to record revenue growth on the back of price hikes taken by the company, which will, in turn, affect volume growth. “We model 13 per cent on-year growth in net domestic revenues, entirely led by price increases. Volume (tonnage) is likely to decline marginally, owing to: 1) continued share loss in Maggi LUP as it increased price point to Rs 7 from Rs 5, whereas ITC Yippee! has maintained price at Rs5, and 2) weak trends in milk/nutrition portfolio,” said Kotak Institutional Equities.
According to brokerage firms and analysts, gross margins at Nestle India are expected to contract due to inflation in key input prices. “Gross margins to contract by 89 bps YoY, due to inflation in key input prices. EBITDA margins expected to contract by 58 bps YoY at 22.8 per cent. EBITDA expected to grow by 11.6 per cent, while PAT to grow by 13.2 per cent YoY, said Prabhudas Lilladher.
Meanwhile, Sharekhan added, “Higher milk and wheat prices might affect margins of food companies such as Nestle India while lower operating leverage might affect margins of companies such as Colgate, Bajaj Consumer Care and Emami,” said Sharekhan.
Brokerage Estimates for Nestle India Q4 FY23 financial results (on-year comparisons):
ICICI Securities
Revenue: Rs 4,488.7 crore; up 12.8%
EBITDA: Rs 960.6 crore; up 3.9%
PAT: Rs 640.3 crore; up 7.7%
Kotak Institutional Equities
Net sales: Rs 4,000 crore; up 12.8%
EBITDA: Rs 1,000 crore; up 13.1%
Reported PAT: Rs 692 crore; up 16.4%
HDFC Securities
Net sales: Rs 4,000 crore; up 13.1%
EBITDA: Rs 1,000 crore; 14.3%
APAT: Rs 720 crore; 20.7%
Prabhudas Lilladher
Sales: Rs 4,000 crore; up 14.5%
EBITDA: Rs 1,000 crore; up 11.6%
Adjusted PAT: Rs 680.20 crore; up 13.1%
Sharekhan
Net sales: Rs 4,448 crore; up 11.7%
Operating margin: 22.3%
Adjusted PAT: Rs 642 crore; up 7.9%
Elara Capital
Revenue: Rs 4,404 crore; up 11.5%
EBITDA: Rs 1,023 crore; up 19.1%
Adjusted PAT: Rs 715 crore; up 20.3%
What to watch from Nestle India Q4FY23 results?
One of the few companies expected to deliver double-digit on-year growth and a preferred pick within the FMCG universe, what are the key things to watch out for in the Q4FY23 results by Nestle India? Key monitorables are: commentary on recovery in trade channels and rural demand, new product pipeline, and demand trends in packaged foods, said HDFC Securities. Earlier this month, Nestle India had declared an interim dividend of Rs 27 per equity share of Rs 10 each for the calendar year 2023 and had announced April 21 as the record date for determining the eligibility of shareholders for interim dividend payment. This is Nestle’s first interim dividend for the year 2023, and will be paid on and from 8 May, along with the final dividend for the year 2022. Earlier, for the year 2022, Nestle issued a total dividend of Rs 220 per share.