Feb 20, 2012, 04.59 PM | Source: Moneycontrol.com
R K Global has recommended hold rating on Nestle India with a target of Rs 4607, in its February 16, 2012 research report.
, R K Global |
“Nestle India gave quite a commendable performance in Q4CY’11, due to the strength of its marquee brands, the engagement of terrific marketing strategies & stronger support provided by Nestle S.A The company’s revenue for Q4CY’11 have increased by ~17% to Rs19,627 mn. Net domestic sales increased by ~17% to Rs18,624 mn on the back of volume growth and selling price hike. The export inclined by ~23% this Q to Rs923 mn. The company has achieved the feat of entering the Rs100 EPS club/Yr in CY’11 as its India operations turns 100.”
“The company’s net revenue for Q4CY’11 has increased by ~17% to Rs19,627 mn. Net domestic sales increased by ~17% to Rs18,624 mn on back of volume growth and selling price hike. The export sales inclined by ~23% to Rs923 mn. Export growth of ~23% has been favorably impacted by the depreciation of the INR, partially offset by the ban on exports of milk powder. The company’s OPM has inclined by 130 bps to ~20.9% due to fall in raw material cost by 90 bps to ~45.8% and other expenditure by 40 bps to ~24.8% of adjusted net sales. The higher commodity prices were partially offset by an improved product/channel mix and operational efficiencies. The operating profit has increased by ~25% to Rs4,108 mn. Other income has inclined by ~7% to Rs100 mn due to higher yields partially offset by lower average liquidities. Interest amount stood at Rs33 mn. Depreciation has increased by ~59% to Rs446 mn. There was EO expenses of Rs277 mn on account of impairment of fixed assets of Rs103 mn and provision for contingencies (net) of Rs169 mn. Total tax outgo has increased by ~33% to Rs1,147 mn due to rise in effective tax rate at ~33% from ~30% due to reduced income tax holiday of Pantnagar factory. The PAT, however fell by ~5% to Rs2,308 mn. For CY’11, the revenue has increased by ~20% to Rs75,144 mn (very aligned to our estimates). Net domestic sales increased by ~20% to Rs70,950 mn due to improved volume and realization. The export sales have also increased by ~12% to Rs3,957 mn has been adversely impacted by the ban on export of milk powder. The OPM inclined by 41 bps to ~20.6%.”
“We believe that Nestle will continue to benefit from the high-growth and under-penetrated foods category. Also, the company is in-sync with urban-centric consumption. We remain positive on the long term prospects of the company and believe that it will continue to trade at premium valuations. At CMP, the stock trades at a P/E of ~29.0x & P/BV of ~12.8x of CY’13E EPS & BVPS of Rs150 & Rs338 respectively. We re-affirm our earlier TP of Rs4,607 and re-iterate HOLD, that gives an upside potential of ~5% from current levels. Our TP is being arrived at a P/E of ~30.7x and P/BV of ~13.6x factored over CY’13E EPS of Rs150 and BVPS of Rs338,” says R K Global research report.
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