Nestle Nigeria PLC - FY'16 starts strong
- ​ NESTLE’s Q1’16 result showed impressive performances across key line items. NESTLE reported a 31% y/y growth in Revenue (
N36 billion), coming in slightly above both Vetiva and Consensus estimate ofN35 billion. Whilst we note that this strong growth was supported by the low base of Q1’15 (due to political uncertainty and heighted insecurity), we highlight that the top line performance stood as the highest first quarter revenue figure recorded in the last decade. Given Management’s unwavering rhetoric to limit price increases, we are inclined to believe this remarkable performance was driven more by volume rather than price. - Although Cost of Sales rose 18% y/y, the expense line came in 8% better than our estimate as the company’s cost reduction drive continues to pay off. With Cost of Sales (as a % of Revenue) at 51% vs. Q1’15: 56% and Q4’15: 55%, Gross margin (49%) came in better than our 44% estimate. Overall, PAT rose 126% y/y to
N6.7 billion, coming in 20% ahead of our estimate. We remain positive about NESTLE’s ability to maintain lower cost profile given its drive to increase domestic sourcing by accelerating several backward integration plans. That said, we have revised our FY’16 EPS estimate toN36.03 (Previous:N32.03) and our 12-month target price toN876.52 (Previous:N863.69).
Nestle Milkpak is engaged in the production, sale and export of dairy products, confectionery, culinary products and fruit juices. Co.'s products include Milkpak Milk, Milkpak Butter, Milkpak Uht Cream, Milkpak Desi Ghee, Nido powdered milk, Milo Powder chocolate energy food drink, Milo RTD, Nescafe Classic instant coffee, Frost fruit drinks, Nestle Orange Juice, Lactogen infant milk formula, Cerelac infant cereal, Nestle Rice infant cereal, Nestle Wheat infant cereal, Neslac growing up milk, Maggi 2-Minute Noodles, Nestle Sweet Treats dessert mixes, Polo mints and candies, Kitkat, Smarties, Fox's, Nestle Lion, Nestle Crunch, Nestle Classic milk chocolate and Nestle Pure Life bottled water.
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