nestleind nifty - narnolia · pdf filethe company has introduced milo ... nse code - nestleind...
TRANSCRIPT
28-Jul-17
Key Highlights of the Report:
52wk Range H/L
Mkt Capital (Rs Cr)
Av. Volume (,000)
Financials/Valu
ation
CY15 CY16 CY17E CY18E FY19ENet Sales 8,175 9,224 10,221 11,455 13,004
EBITDA 1,555 1,807 1,897 1,927 2,215
EBIT 1,208 1,453 1,554 1,573 1,862
PAT 563 927 1,103 1,137 1,349
2QCY17 1QCY17 4QCY16 EPS (Rs) 58 96 114 118 140
Promoters 62.8 62.8 62.8 EPS growth (%) -52% 64% 19% 3% 19%
Public 37.2 37.2 37.2 ROE (%) 32% 31% 32% 31% 33%
Total 100.0 100.0 100.0 ROCE (%) 43% 48% 45% 42% 45%
BV 292 313 344 375 413
P/B (X) 16.9 19.8 21.0 19.7 18.1
1Mn 3Mn 1Yr P/E (x) 99.3 68.2 59.3 57.5 48.5
Absolute 2.6 5.6 (4.5)
Rel.to Nifty (2.1) (1.6) (20.5) Recent development and launches:
Nestle India has launched new range of Noodles Maggi Masala in India.
The new range of MAGGI noodles includes four new flavors - Amritsari
Achari, Mumbaiya Chatak, Super Chennai and Bengali Jhaal.
In this quarter, Nestle India tied up with Google and Paytm for promotion
to create strong bonding with consumers which may boost volumes going
forward.
The Company has introduced Milo Ready to drink – the sports partner for
kids in 1QCY17.
NESTLE India extends NESTLE a+ GREKYO range with the launches of
Blueberry Greek Yoghurt and Greek Style Curd.
Domestic revenue grew by 8.8% led by increase in volume supported by
new launches, revival of Maggie and better realization.
Exports declined by 12% YoY to Rs 148 cr due to lower sales of Milk &
Nutrition products to Bangladesh and Middle East.
Gross margin declined by 244 bps YoY to 56.6% mainly due to higher
prices of milk and its derivatives.
Considering slow traction in the new product launches we have reduced
our target from Rs 7920 to Rs 7500 though we still have a positive view
on the company and expect traction from new product to catch up. We
maintain BUY rating on NESTLEIND.
INDUSTRY -
The company has reported numbers inline to our estimates for Q2CY17,
sales grew by 7% YoY whereas PAT grew by 10% YoY.Target Price 7500
Previous Target Price 7920
NIFTY - 10021
Con. Staples
BSE Code - 500790
NSE Code - NESTLEIND
CMP 6789
34
Upside 10%
7390/5701
RoE & ROCE
65,460
RAJEEV [email protected]
Narnolia Securities LtdPlease refer to the Disclaimers at the end of this Report
Company Data
Stock Performance %
Shareholding patterns %
80
85
90
95
100
105
110
115
120 NESTLEIND NIFTY
32% 31% 32%31%
33%
43%
48%45%
42%45%
0%
10%
20%
30%
40%
50%
60%
CY15 CY16 CY17E CY18E FY19E
ROE ROCE
Financials 2QCY16 3QCY16 4QCY16 1QCY17 2QCY17 2QCY16 QoQ% CY15 CY16 YoY %
Net Sales 2,317 2,363 2,286 2,592 2,485 7% -4% 8,175 9,224 13%
Other Income 37 37 41 42 41 12% -1% 110 149 36%
COGS 950 986 959 1,094 1,079 14% -1% 3,469 3,880 12%
Net Provi. For Contin. 11 10 9 10 (3) -127% -131%
Employee Cost 227 270 294 246 253 12% 3% 913 1,073 18%
Other Expenses 585 650 617 625 611 4% -2% 2,147 2,410 12%
EBITDA 476 447 403 517 462 -3% -11% 1,555 1,807 16%
Depreciation 89 88 87 87 85 -4% -1% 347 354 2%
Interest (22) 0 0 (23) (23) 4% 1% 3 4 34%
PBT 391 397 276 450 395 1% -12% 814 1,440 77%
Tax 119 127 113 143 131 11% -8% 250 519 107%
PAT 240 269 164 307 263 10% -14% 563 921 63%
Better revenue growth led by better domestic business performance
Narnolia Securities LtdPlease refer to the Disclaimers at the end of this Report
Quarterly Performance
NESTLE’s sales for this quarter grew by 7% YoY to Rs 2485 cr led by 8.8% growth in domestic
business revenue.
Domestic revenue grew by 8.8%YoY to Rs 2321 cr led by increase in volume supported by new
launches, better performance by Maggie and better realization.
Gross margin declined by 244 bps YoY to 56.6% mainly due to higher prices of milk and its
derivatives. Management did not pass on increase in input prices fully to consumers.
EBITDA margin declined by 197 bps YoY to 18.6% due to 244 bps ,41 bps and 39 bps YoY
increase in COGS, employee expenses and excise duty respectively.
Tax Rate for this quarter increased by 289 bps YoY due to the end of first 5 years of Income Tax
Holidays of 100% of the profits of Samalkha factory unit-2.
PAT margin improved by 23 bps YoY to 10.6% due to presence of exceptional cost of Rs32 cr in
previous quarter. PAT grew by 10% YoY to Rs 263 cr from Rs 240 cr.
Gross margin declined by 244 bps YoY mainly due to higher
milk and derivatives
prices.
25
16
19
57
17
42
19
59
23
68
23
17
23
63
22
86
25
92
24
85
309
-64
124
183
287
240269
164
307
263
-100
-50
0
50
100
150
200
250
300
350
0
500
1000
1500
2000
2500
3000
Sales(in cr) PAT(in cr)
21.8%
19.2%
15.3%
18.0%
21.7%20.6%
18.9%17.6%
20.0%18.6%
12.3%
-3.3%
7.1%
9.3%
12.1%10.4%
11.4%
7.2%
11.8%10.6%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
OPM NPM
NESTLE didn’t take price hike in CY16, so expect hike in CY17 Prepared Dishes(includes Maggie) Volume and growth
View & Valuation
Narnolia Securities LtdPlease refer to the Disclaimers at the end of this Report
NESTLE has reported numbers inline to our estimates for Q2CY17, sales grew by 7% YoY whereas
PAT grew by 10% YoY. The company has launched more than 25 products in last few quarters. Going
forward, it has plans to launch more new products from its parent’s global product portfolio. Secondly,
company’s most of the sales come from urban areas, approx. 75%, hence any recovery in urban
demand will be huge positive for the company. Presently, regaining of market share by Maggi to 60%
versus peak market share of 75% is the key positive but traction from new product launches have not
been very strong. Considering slow traction in the new product launches we have reduced our target
from Rs 7920 to Rs 7500 though we still have a positive view on the company and expect traction from
new product to catch up. We maintain BUY rating on NESTLEIND.
Urban demand recovery led growth going forward: For last four years urban demand is
struggling due to higher inflation and lower economic activities which is one of the causes of
company’s dismal performance. As NESTLE’s most of the sales comes from urban areas,
approx. 75%, hence any recovery in urban demand will be huge positive for the company. We
expect better demand scenario for urban market going ahead led by declining inflation and
interest rate scenario. Hence we have positive view on NESTLE.
Smart bounce back by Maggie shows strong brand value: Nestle re-launched Maggie on
9 Nov., 2015 and within 53 days of re-launch, it regained market share of 33% which shows
strong brand power. Presently, Maggie’s market share has reached to 60% versus peak
market share of 75% which is commendable. It shows new management’s aggression and
focus towards NESTLE’s future growth. Going forward we expect brand Maggie to consolidate
further with more market share gain.
Investment Arguments:
New product launches, the key of future growth: After Maggie fiasco, company’s new
management has become more aggressive in launching new products. The company has
launched more than 25 products in last few quarters. NESTLE has strong backing of its parent
with more than 2000 products globally .Going forward, it has plans to launch more new
products from its parent’s global product portfolio. New product launches will improve
company’s volume going forward.
Historically NESTLE has strong pricing power: As in most the FMCG categories input
prices have bottomed out and have started moving up. Hence going forward we expect growth
for FMCG will be pricing led. NESTLE has strong premium product portfolio and strong pricing
power.
12
22
08
15
89
93
19
34
94
21
90
41
23
65
54
24
54
43
25
45
53
10
31
38
17
84
67
25%30%
22%13%
8% 4% 4%
-59%
73%
-80%
-60%
-40%
-20%
0%
20%
40%
60%
80%
0
50000
100000
150000
200000
250000
300000
Prepared Dishes Vol.(in MT) Vol. Growth YoY
8%
5%2%
13%11%
7%9%
31%
-11%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
35%
Overall Realization growth YoY
Income Statement Rs in Crores Key Ratios
Y/E March CY16 CY17E CY18E CY19E Y/E March CY16 CY17E CY18E CY19E
Revenue from Operation 9,224 10,221 11,455 13,004 ROE 31% 32% 31% 33%
Change (%) 13% 11% 12% 14% ROCE 48% 45% 42% 45%
Other Operating Income Asset Turnover 1.4 1.3 1.4 1.4
EBITDA 1,807 1,897 1,927 2,215 Debtor Days 4 4 4 4
Change (%) 16% 5% 2% 15% Inventory Days 37 37 37 37
Margin (%) 20% 19% 17% 17% Payable Days 32 32 32 32
Dep & Amortization 354 343 354 353 Interest Coverage 414 59 60 71
EBIT 1,453 1,554 1,573 1,862 P/E 68 59 57 48
Interest & other finance cost 4 26 26 26 Price / Book Value 20 21 20 18
Other Income 149 187 223 263 EV/EBITDA 35 34 33 29
EBT 1,442 1,715 1,769 2,099 FCF per Share 140 119 123 145
Exceptional Item (31) - - - Dividend Yield 0.9% 1.0% 1.1% 1.3%
Tax 515 613 632 750
Minority Int & P/L share of Ass. - - - - Assumptions
Reported PAT 927 1,103 1,137 1,349 Y/E March CY16 CY17E CY18E FY19E
Adjusted PAT 946 1,103 1,137 1,349 Volume growth 36% 8% 6% 9%
Change (%) 4% 17% 3% 19% Pricing growth -11% -1% 6% 5%
Margin(%) 10% 11% 10% 10%
Balance Sheet Rs in Crores Cash Flow Statement Rs in Crores
Y/E March CY16 CY17E CY18E CY19E Y/E March CY16 CY17E CY18E CY19E
Share Capital 96 96 96 96 PBT 1,442 1,715 1,769 2,099
Reserves 2,917 3,311 3,617 3,981 (inc)/Dec in Working Capital 285 55 68 85
Networth 3,014 3,407 3,714 4,077 Non Cash Op Exp 366 343 354 353
Debt 33 33 33 33 Interest Paid (+) 4 26 26 26
Other Non Current Liab - - - - Tax Paid (503) (613) (632) (750)
Total Capital Employed 3,047 3,440 3,747 4,110 others (148) - - -
Net Fixed Assets (incl CWIP) 2,918 2,904 2,892 2,881 CF from Op. Activities 1,466 1,480 1,528 1,741
Non Current Investments 474 607 757 907 (inc)/Dec in FA & CWIP (113) (329) (342) (342)
Other Non Current Assets 135 135 135 135 Free Cashflow 1,353 1,151 1,186 1,399
Non Current Assets 3,527 3,646 3,784 3,924 (Pur)/Sale of Investment - (433) (450) (450)
Inventory 943 1,045 1,171 1,330 others (14) - - -
Debtors 98 109 122 138 CF from Inv. Activities (127) (762) (792) (792)
Cash & Bank 880 1,159 1,345 1,605 inc/(dec) in NW - - - -
Other Current Assets 26 29 32 36 inc/(dec) in Debt (0) - - -
Current Assets 3,279 3,979 4,616 5,365 Interest Paid (4) (26) (26) (26)
Creditors 799 886 992 1,127 Dividend Paid (inc tax) (679) (710) (736) (890)
Provisions 321 355 398 452 others 17 250 250 250
Other Current Liabilities 513 568 637 723 CF from Fin. Activities (667) (487) (512) (667)
Curr Liabilities 1,633 1,809 2,028 2,302 Inc(Dec) in Cash 672 231 224 282
Net Current Assets 1,646 2,170 2,589 3,063 Add: Opening Balance 1,472 880 1,159 1,345
Total Assets 6,806 7,626 8,400 9,289 Closing Balance 2,144 1,111 1,383 1,628
Financials Snap Shot
Narnolia Securities LtdPlease refer to the Disclaimers at the end of this Report
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