Nestle India Posts Muted Topline Growth
DSIJ Intelligence / 22 Feb 2013
The company following the calendar year posted its Q4 results. It has seen a passive topline growth, much like most of its peers in the sector.
Nestle India came out with a subdued set of Q4FY12 numbers. One must note that company is following the calendar year and hence its December 2012 quarter is the fourth quarter. For the quarter, Nestle India's topline grew at a meager rate of 10% to Rs 2161 crore while the company managed to post a decent bottomline growth of 21% to Rs 279 crore on a YoY basis. The following table gives us an overview of the numbers:
| Particulars | Dec 2012 | Dec 2011 | % change |
|---|---|---|---|
| Net Sales/Income from operations | 2152.6 | 1954.6 | 10.13 |
| Total Income From Operations | 2161 | 1962.71 | 10.1 |
| Consumption of Raw Materials | 972.3 | 942.75 | 3.13 |
| Other Expenses | 517.5 | 502.1 | 3.07 |
| Operating Profit | 489.02 | 400.52 | 22.1 |
| Depreciation | 83.5 | 44.6 | 87.22 |
| Interest | 9.9 | 3.3 | 200 |
| Tax | 129.3 | 114.7 | 12.73 |
| Net Profit/(Loss) | 278.93 | 230.83 | 20.84 |
| Diluted EPS | 28.93 | 23.94 | 20.84 |
| Ratios (%) | Dec 2012 | Dec 2011 | Change BPS |
| Raw material to sales | 44.99 | 48.03 | -3.04 |
| Operating Margin | 22.63 | 20.41 | 2.22 |
| Net Profit Margin | 12.91 | 11.76 | 1.15 |
More than 95% of the company's turnover comes from the domestic business while the remaining 5% comes from the exports market. Sales from the domestic business grew at 9.59% to Rs 2041 crore, while exports grew by 21% to Rs 92 crore on a YoY basis.
For the December 2012 quarter, the operating profit of the company grew by 22% to Rs 489 crore on a YoY basis. The operating margins expanded by 222 basis points to 22.63% on a YoY basis, which is quite commendable. The operating margins of the company expanded majorly after higher realisations and softening of the input costs, which grew only by 3% to Rs 972 crore on a YoY basis. The raw material to sales ratio decreased substantially by 304 basis points to 44.99%, helping the company to post better margins for the quarter. For the full year ended FY12, the net sales and net profit of the company grew at 11% each, to Rs 8302 and Rs 1068 crore on a YoY basis. The growth for the full year in case of domestic business grew by 10.8% while exports business grew by 7.6% on a YoY basis.
The board of directors also announced a third interim dividend of Rs 12.50 per share. One should note that company had declared two interim dividend of Rs 18 each in August and December 2012. With this announcement, the total dividend for FY12 stands at Rs 48.50 per share, which at current market price of Rs 4593 per share gives a dividend yield of 1.05%.
On the valuations front, the company is currently available at a Price to Earnings multiple of 41.46x with the FY12 Earning Per Share of Rs 110.76. We believe that the sector as a whole is facing some issues on the topline growth, after lower disposable income and slowing of consumers demand. The slowdown in growth and with the stock available at a higher valuation, we believe that there is some downside risk in the counter and hence one could apply a ‘wait-and–watch’ approach.
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