Nestle India Ltd. RESULT UPDATE

Transcription

1 RESULT UPDATE 15th May 2017

2 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17 India Equity Institutional Research II Result Update Q1CY17 II 15th May, 2017 CMP INR 6819 Target INR 7075 Potential Upside 3.7% Market Cap (INR Mn) Weak quarter led by low margins and Surge in input costs Recommendation HOLD Sector FMCG 2 Result highlights Nestle India Ltd declared its Q1CY17 results with INR of Mn with growth of 9.5% yoy and 9.8% qoq due to increase in volume more than price. EBIDTA stood at INR Mn with de-growth of 4.1% yoy and growth of 6.9% qoq. EBIDTA margin for the quarter remained low at 20.3% down by 288 bps yoy and 56 bps qoq. PAT before exceptional for Q1CY17 stood at INR Mn with growth of 4.0% yoy and 5.9% qoq. PAT margins remained at 12.1% MARKET DATA Shares outs (Mn) 96 EquityCap (INR Mn) 964 Mkt Cap (INR Mn) Wk H/L (INR) 7390/5490 Volume Avg (3m K) 38.9 Face Value (INR) 10 Bloomberg Code NEST IN KEY FINANCIALS Particulars (INR Mn) CY14 CY15 CY16E CY17E CY18E Net Sales EBITDA PAT PAT After Exceptional EPS (Rs.) EBITDA Margins (%) 20.7% 19.3% 20.9% 21.9% 22.0% PAT Margins before exceptional (%) 12.0% 13.3% 13.0% 14.5% 14.6% PAT Margins after exceptional (%) 12.0% 6.9% 10.0% 13.1% 13.8% Source: Company, SHARE PRICE PERFORMANCE Sensex Nestle Revenue remains below expectation: Q1CY17 sales without operating income remained at Mn which is an growth of 9.1% yoy and 10.3% qoq. Out of which domestic sales for Nestle stood at INR with the growth of 9.7% yoy and 11.2% qoq which contributed 94% of the revenue. While 6% was contributed by exports sales at INR mn with growth of 0.6% yoy and de-growth of 0.5% qoq. Total operating revenue posted for Q1CY17 was at INR Mn with growth of 9.55 yoy and 9.8% qoq. Increase in revenue was more because of volume growth during the quarter rather than price growth. Cost increase hits margins: Nestle Q1CY17 posted lower margins and also margins remain below our estimates. EBIDTA margins were around 20.3% for Q1CY17 as compared to 23.1% for Q1CY16 which was a decrease of 288bps and 20.8% as compared to Q4CY16 which was also a decrease of 56bps. Margins declined due to increase of expenses during the quarter. Expenses like raw material increased by 10.8% yoy and 13.9% qoq. Also if we see there is an increase of employee cost by 15.8% yoy and 7.9% qoq, while other expense showed decline of 4.1% yoy but however it increase 6.9% qoq. PAT before exceptional item during the quarter remained at INR Mn with PAT margin at 12.1%. PAT after exceptional item remained at INR Mn with margin of 11.8% with decrease of 30bps yoy and 355bps qoq due to higher exceptional expense during Q4CY16.For Q1CY17, tax rate was at 31.2% and EPS stood at INR MARKET INFO SENSEX NIFTY 9401 Valuations & Views: Nestle India Ltd is one of the largest company in FMCG space with its presence of 100 years in this sector Company s is well-known for the products in brands like Maggi (Noodles), Ketchup s, Nescafe, milk powder (Brand - Everyday), chocolate (Kit-Kat), etc and total contribution in revenue from all these is around 50%. Company has its leadership in category like Noodles & Dairy whiteners, etc and we remain positive for the growth for the company. Going ahead management focus to remain on expanding its core brand and other brands with strategy and grow in changing consumer landscape. Nestle India Ltd would gear up through its volumes and innovative products launches across segment. We expect revenue growth of 10-12% in CY17E & CY18E. The stock is currently trading at an EPS of its CY18E. We recommend a HOLD rating on the stock with a target price of INR 7075, giving an upside potential of 3.7%. SHARE HOLDING PATTERN (%) Particulars Mar 17 Dec 16 Sep 16 Promoters FIIs DIIs Others Total % 8.9% PAT CAGR between CY14 and Revenue CAGR between CY14 and CY18E CY18E

3 Q4FY17 Result Snapshot 3 Exhibit 1 Quarterly Income Statement (INR Mn) Particulars Q1 CY17 Q4 CY16 Q1 CY16 Q-o-Q change % Y-o-Y change % Net Sales & Other Operating Income % 9.5% Total Expenditure % 13.6% Cost of Raw Materials % 17.5% Purchase of Finished Goods % 34.3% (Increase) / Decrease In Stocks % % Employee Cost % 15.8% Operating & Manufacturing Expenses % 17.2% EBIDTA % -4.1% EBITDA Margins (%) 20.3% 20.8% 23.1% -56bps -288bps Depreciation % -2.8% EBIT % -11.9% Other Income % 17.7% Interest % -12.2% PBT % -2.3% Tax % -13.9% PAT before Exceptional % 4.0% PAT Margin (%) 12.1% 12.6% 12.8% -45bps -63bps Exceptional Items % -48.2% PAT after Exceptional % 6.8% PAT Margin (%) 11.8% 8.3% 12.1% 355bps -30bps EPS (after exceptional) % 6.8% Source: Company,

4 Exhibit 2: Income Statement (INR Mn) 4 INR Mn CY14 cy15 CY16 FY17E FY18E Net Sales EXPENDITURE : (Increase) / Decrease In Stocks Purchase of Finished Goods Raw Materials Consumed Other Expenses Employee Cost Impairment loss on fixed assets Net provisions for contingencies Total Expenditure EBITDA EBITDA Margin 20.7% 19.3% 20.9% 21.9% 22.0% Other Income Operating Profit Interest PBDT Depreciation Profit Before Tax Provision for Tax Profit After Tax PAT Margin 12.0% 13.3% 13.0% 14.5% 14.6% Exceptional Item Profit After Tax & Exceptional Item PAT Margin after Exceptional Item 12.0% 6.9% 10.0% 13.1% 13.8% Source: Company,

5 5 Exhibit 3: Balance Sheet (INR Mn) INR Mn CY14 cy15 CY16 FY17E FY18E EQUITY AND LIABILITIES Share Capital Total Reserves Shareholder's Funds Long-Term Borrowings Deferred Tax Assets / Liabilities Long Term Provisions Total Non-Current Liabilities Current Liabilities Trade Payables Other Current Liabilities Short Term Borrowings Short Term Provisions Total Current Liabilities Total Liabilities ASSETS Non-Current Assets Net Block Long Term Loans & Advances Non-Current Investments Other Non-Current Assets Total Non-Current Assets Current Assets Currents Investments Inventories Sundry Debtors Cash and Bank Other Current Assets Short Term Loans and Advances Total Current Assets Total Assets Source: Company,

6 6 Exhibit 4: Cash flow statement (INR Mn) INR Mn CY14 cy15 CY16E FY17E FY18E PBT Depreciation and Amortization Interest Expense Cash Flow From Operating Activities Cash Flow From Investing Activities Cash Flow From Financing Activities Increase/Decrease in Cash Opening Cash Balance Closing Cash Balance Source: Company, Exhibit 5: Ratio Analysis INR CY14 cy15 CY16 FY17E FY18E EPS (Rs.) EBITDA Margins (%) 20.7% 19.3% 20.9% 21.9% 22.0% PAT Margins (%) 12.0% 13.3% 13.0% 14.5% 14.6% ROE (%) 41.8% 38.5% 39.9% 37.4% 32.7% ROCE (%) 38.1% 26.7% 30.4% 30.9% 30.4% Net Sales Growth (%) 8.3% -17.0% 12.8% 10.0% 12.0% EBITDA Growth (%) 4.0% -22.7% 22.2% 15.5% 12.5% PAT Growth (%) 6.0% -8.4% 10.9% 22.0% 13.3% PE (x) Price / Book Value(x) EV/EBITDA(x) Source: Company,

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