Nestle India Q4 results preview: Robust net profit, revenue growth eyed as volume, pricing improve

Nestle India follows a January-to-December financial year.

Nestle India is expected to report strong revenue growth and a robust double-digit net profit growth in Q4FY24, helped by improvements in both volumes and pricing.

The FMCG firm will announce its results on February 7.

Nestle India is expected to report a 14.5 percent on-year increase in its fiscal fourth quarter net profit to Rs 721 crore, as per the mean of five brokerage firms’ estimates. Revenue is expected to grow 9.7 percent YoY to Rs 4,646 crore in Q4FY24. Nestle India follows a January-to-December financial year.

The company’s Earnings Before Interest Tax Depreciation and Amortisation (EBITDA) margin is expected to increase 81 basis points to 23.8 percent in the October-to-December quarter, mainly due to improvement in pricing and mix.

Most FMCG firms in India saw lower volume growth in October-December due to a non-pick-up in the delayed festive season. For example, Hindustan Unilever's volumes grew 2 percent in the October-to-December quarter. While Marico's volumes grew 2 percent in the same period.

On the other hand, Nestle's instant noodles market growth has remained under pressure from competition from regional and local players in the October-to-December quarter, said domestic brokerage firm Prabhudas Lilladher. Nestle India has the Maggie brand in this segment.

Unorganised competition continues to limit sales recovery

Urban FMCG markets have continued to grow ahead of rural markets by low to mid-single digits in October-December, said Prabhudas Lilladher. "Competition from unorganised players has been visible in select food and rural demand recovery hinges on higher government expenditure ahead of elections, higher marginal selling price and softening inflation," said the brokerage firm.

Cocoa Bean prices have increased 62 percent YoY in the October-to-December prices, as per Kotak Institutional Equities. Sugar and wheat prices have increased 11 and 9 percent YoY respectively in Q4FY24. Milk prices have fallen 14 percent YoY in the same period. Nestle India uses Cocoa Bean for its coffee brand Nescafe.

Kotak Institutional Equities expects gross margins to be broadly flat sequentially due to deflation in edible oils, wheat, packaging, and dairy prices. Gross margins are expected to increase by 10 basis points sequentially and by 170 basis points on a YoY basis to 56.6 percent.

Nestle India management expects to spend Rs 50,000 crore on capex and opex over FY23-26, said BNP Paribas. "This is almost 8 percent of sales over FY23-26 which, in our opinion, is high for an FMCG company," said the brokerage firm.

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