NESTLE INDIA LTD Result Update (PARENT BASIS): Q2 CY18

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1 Index Details NESTLE INDIA LTD Result Update (PARENT BASIS): Q2 CY18 Stock Data Sector Packaged Foods BSE Code Face Value wk. High / Low (Rs.) / Volume (2wk. Avg.) Market Cap (Rs. in mn.) Annual Estimated Results(A*: Actual / E*: Estimated) Years (Rs. in mn) CY17A CY18E CY19E Net Sales EBITDA Net Profit EPS P/E Shareholding Pattern (%) As on June 2018 As on Mar 2017 Promoter Public Others Year Comparative Graph NESTLE INDIA LTD S&P BSE SENSEX CMP: AUG 27 th, 2018 Overweight SYNOPSIS ISIN: INE239A01016 Nestle India Ltd, one the biggest players in FMCG segment, has a presence in milk & nutrition, beverages, prepared dishes & cooking aids & chocolate & confectionery segments. The company achieved a turnover of Rs mn for the 2 nd quarter of the CY 2018 as against Rs mn in the corresponding quarter of the previous year, an increase of 8.60%. During the quarter, net profit rose by 49.96% at Rs mn as against Rs mn in the corresponding quarter ending of previous year. During the quarter, EBIDTA stood at Rs mn as against Rs mn in the corresponding period of the previous year. During the quarter, PBT increased by 50.88% to Rs mn from Rs mn in the corresponding period of the previous year. EPS of the company stood at Rs in Q2 CY18 against Rs in the corresponding quarter of the previous year. Total Sales and Domestic Sales for the quarter increased by 8.5% and 8.0% respectively. Cash Flow of the company registered at Rs mn in Q1 CY18 as on 30th June Nestle India Ltd entered into new category named Nesplus under Breakfast category with various flavors. The company laying the foundation in Health Science by introducing Adult Oral Nutrition Supplement, Disease Specific Supplements, Pediatric Allergy, Critical Care Nutrition. Nestle India declared second interim dividend of Rs. 20/- per equity share of Rs. 10/- each for the year Net Sales and PAT of the company are expected to grow at a CAGR of 11% and 33% over 2016 to 2019E, respectively. PEER GROUPS CMP MARKET CAP EPS(TTM) P/E (X)(TTM) P/BV(X) DIVIDEND Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%) Nestle India Ltd Britannia Industries Ltd GlaxoSmithKline Consumer Healthcare Ltd Heritage Foods Ltd

2 QUARTERLY HIGHLIGHTS (PARENT BASIS) Results update- Q2 CY18, (Rs. in millions) June-18 June-17 % Change Revenue % Net Profit % EPS % EBIDTA % The company has achieved a turnover of Rs million for the 2 nd quarter of the CY2018 as against Rs million in the corresponding quarter of the previous year, an increase of 8.60%. During the 2 nd quarter, net profit increased by 49.96% and stood at Rs million as against Rs million in the corresponding quarter ending of previous year. Reported earnings per share of the company stood at Rs in Q2 CY18 as against Rs in the corresponding quarter of the previous year. Profit before interest, depreciation and tax stood at Rs million as against Rs million in the corresponding period of the previous year, up by 38.87%. Break up of Expenditure Break up of Expenditure Cost of Materials consumed Purchase of Stock in Trade Value in Rs. Million Q2 CY18 Q2 CY17 % Change % % Excise Duty Employee Benefit Expenses Depreciation & amortization expense % % Other expenses % Net Provisions for Contingencies %

3 H1 CY18 Result Highlights: During H1 CY18 the domestic sales of the company registered at Rs mn as compared to Rs mn in Q1 CY17, up by 7.1%. Exports sales of the company registered a growth of Rs mn in Q1 CY18 from Rs mn in Q1 CY17, up by 10.7%. Cash Flow of the company registered at Rs mn in Q1 CY18 as on 30 th June Innovations: Nestle India Ltd entered into new category named Nesplus under Breakfast category with various flavors. The company laying the foundation in Health Science by introducing Adult Oral Nutrition Supplement, Disease Specific Supplements, Pediatric Allergy, Critical Care Nutrition. Dividend: Nestle India declared second interim dividend of Rs. 20/- per equity share of Rs. 10/- each for the year HY-18 Product Wise Revenue:

4 HY-2018 Operating segments quarterly summary: HY-2018 Operating Segments Topline Summary:

5 COMPANY PROFILE Nestle India Ltd, one the biggest players in FMCG segment, has a presence in milk & nutrition, beverages, prepared dishes & cooking aids & chocolate & confectionery segments. The company is engaged in the food business. The food business incorporates product groups, such as milk products and nutrition, beverages, prepared dishes and cooking aids, chocolates and confectionery. Nestle India manufactures products under brand names, such as Nescafe, Maggi, Milkybar, Milo, Kit Kat, Bar-One, Milkmaid and Nestea. The company has also introduced products of daily consumption and use, such as Nestle Milk, Nestle Slim Milk, Nestle Fresh n Natural Dahi and Nestle Jeera Raita. The companys brands include milk products and nutrition, prepared dishes and cooking aids, beverages, and chocolates and confectionery. Their milk products and nutrition includes Nestle Everyday Dairy Whitener, Nestle Everyday Ghee, Nestle Milk, Nestle Slim Milk and Nestle Dahi. Beverages Include Nescafe Classic, Nescafe Sunrise Premium, Nescafe Sunrise Special and Nescafe Cappuccino. Nestle India is a subsidiary of Nestle S.A. of Switzerland

6 FINANCIAL HIGHLIGHT (PARENT BASIS) (A*- Actual, E* -Estimations & Rs. In Millions) Balance Sheet as of December 31 st, E CY16A CY17A CY18E CY19E ASSETS 1) Non-Current Assets a) Property, plant and equipment b) Capital Work in Progress c) Financial Assets i) Investments ii) Loans d) Other Non Current Assets Sub - Total Non- Current assets ) Current Assets a) Inventories b) Financial assets i) Investments ii) Trade Receivables iii) Cash and Cash equivalents iv) Bank Balances other than cash and Cash Equivalents v) Loans vi) Other Financial Assets c) Current Tax Assets d) Other Current Assets Sub - Total Current Assets Total Assets (1+2) EQUITY AND LIABILITIES 1) EQUITY a) Equity Share Capital b) Other Equity Total Equity ) Non Current Liabilities a) Financial Liabilities i) Borrowings b) Provisions c) Deferred Tax liabilities (Net) d) Other Non-Current Liabilities Sub - Total Non Current Liabilities ) Current Liabilities a) Financial liabilities i) Borrowings ii) Trade Payables iii) Other financial liabilities b) Current Tax Liabilities c) Provisions d) Other Current Liabilities Sub - Total Current Liabilities Total Equity and Liabilities (1+2+3)

7 Annual Profit & Loss Statement for the period of 2016 to 2019E Value(Rs.in.mn) CY16A CY17A CY18E CY19E Description 12m 12m 12m 12m Net Sales Other Income Total Income Expenditure Operating Profit Interest Gross profit Depreciation Exceptional Items Profit Before Tax Tax Net Profit Equity capital Reserves Face value EPS Quarterly Profit & Loss Statement for the period of 31 st Dec, 2017 to 30 th Sep, 2018E Value(Rs.in.mn) 31-Dec Mar June Sep-18E Description 3m 3m 3m 3m Net sales Other income Total Income Expenditure Operating profit Interest Gross profit Depreciation Profit Before Tax Tax Net Profit Equity capital Face value EPS

8 Ratio Analysis Particulars CY16A CY17A CY18E CY19E EPS (Rs.) EBITDA Margin (%) 21.12% 22.31% 25.52% 26.17% PBT Margin (%) 16.31% 18.05% 21.38% 22.22% PAT Margin (%) 10.57% 12.02% 14.11% 14.71% P/E Ratio (x) ROE (%) 30.51% 35.82% 40.67% 41.37% ROCE (%) 49.68% 55.88% 63.82% 64.65% Debt Equity Ratio EV/EBITDA (x) Book Value (Rs.) P/BV Charts

9 OUTLOOK AND CONCLUSION At the current market price of Rs , the stock P/E ratio is x CY18E and x CY19E respectively. Earning per share (EPS) of the company for the earnings for CY18E and CY19E is seen at Rs and Rs respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 10% and 33% over 2016 to 2019E respectively. On the basis of EV/EBITDA, the stock trades at x for CY18E and x for CY19E. Price to Book Value of the stock is expected to be at x and x for CY18E and CY19E respectively. Hence, we say that, we are Overweight in this particular scrip for Medium to Long term investment. INDUSTRY OVERVIEW Nestle India Ltd s 2017 organic sales growth was within the guided range but below its expectations, in particular due to weak sales development towards the end of the year. Sales growth in Europe and Asia was encouraging while North Company s cost-reduction initiatives delivered margin improvement ahead of 2017 expectations, in spite of considerable commodity price increases. During the past months, company has completed initial portfolio adjustments with very favourable results. Company will continue this active portfolio management approach in a disciplined manner and fully in line with its strategy. Regarding its core portfolio, accelerating the growth through product innovation and renovation is high on the agenda. Organic sales growth is expected to improve in 2018 and is firmly on track for 2020 margin improvement target.

10 Group sales: Organic growth (OG) of 2.4% was at the low end of expectations, following slow growth of 1.9% in the fourth quarter. Real internal growth (RIG) was 1.6% for the full year and remained at the high end of the food and beverage industry. Pricing of 0.8% was consistent with the prior year. Organic growth was 0.7% in developed markets and 4.8% in emerging markets. Net divestments reduced sales by 1.9%, largely related to the creation of the Froneri joint venture. Foreign exchange had a minimal negative impact of 0.1%. Total reported sales were CHF 89.8 billion, a 0.4% increase for the year. Organic growth in Zone AMS was subdued and decelerated in the back half of the year. Excluding the confectionery business, growth in the United States was flat, reflecting soft consumer demand and challenging category dynamics. Brazil maintained solid RIG in a difficult trading environment, but pricing was negative due to deflationary pressures. Mexico was resilient and other parts of Latin America sustained good momentum. Growth in Zone EMENA increased following a significant improvement in the second half of the year, with two consecutive quarters in excess of 3%. This was largely driven by strong results in pet care and coffee. Zone AOA saw its highest growth in four years, with positive RIG and pricing. This was based on a return to positive growth in China, which was achieved despite difficult comparables in the fourth quarter due to the timing of Chinese New Year. There was continued good growth across the other sub regions. Nestlé Waters posted high single digit growth in the international premium brands. The regional brands in North America faced weak demand and pricing pressure. Growth remained soft in Nestlé Nutrition as sales were subdued in North America and declined in Brazil. There was modest improvement in China, driven by new organic offerings. Nespresso reported consistent mid single digit growth, with positive momentum in all regions and sustained mid teen growth in North America. Nestlé Health Science maintained solid growth and Nestlé Skin Health improved slightly. All categories reported positive growth, led by coffee, pet care and Nestlé Health Science. Outlook: In 2018, Company expects organic sales growth between 2% and 4%, and Underlying Trading operating profit margin improvement in line with its 2020 target. Restructuring costs are expected at around CHF 700 million. Underlying earnings per share in constant currency and capital efficiency are expected to increase.

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