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MOSL: NESTLE INDIA (Neutral)-Good set of numbers-cost pressures now starting to mount

Nestle India: Good set of numbers; cost pressures now starting to mount

(NEST IN, Mkt Cap USD12.5b, CMP INR9540, TP INR10130, 6% Upside, Neutral)

 

• NEST’s net sales increased 16.9% YoY to INR29.4b (our estimate: INR28.2b). Domestic sales grew 17.5% YoY, while exports increased 7.9% YoY to INR1.7b. EBITDA rose 25.6% YoY to INR7.4b (our estimate: INR6.8b) and adj. PAT increased 32.3% YoY to INR4.6b (our estimate: INR4.3b).
• Gross margin expanded 290bp YoY to 59.7% (our estimate: 58.9%) due to favorable commodity prices during the quarter. In its press release, NEST stated that it is now facing some headwinds from RM costs, crude-led inflation and currency depreciation.
• EBITDA margin expanded 180bp YoY to 25.2%. Other expenses increased 150bp YoY to 24.6% of sales, led by higher marketing spends and an increase in fuel prices. During the quarter, NEST introduced MAGGI Special Masala Noodles, MAGGI Dip and Spread, KITKAT Dessert Delight Brownie Kubes, NESCAFE E coffee machine and NESPLUS Breakfast Cereals. Staff costs, however, declined 40bp YoY in the quarter.
• Other income grew 56% YoY to INR670m due to higher average liquidities and increased yields.
• 9MCY18 performance: Net sales/EBITDA/adj. PAT increased 13.3%/34.4%/42.1%. EBITDA margin expanded 400bp YoY to 25.2%.