in

Nestle Q1 preview: PAT may rise up to 14% YoY, say analysts

Nestle

Analysts expect gross margins to improve, led by benign input prices.

Nestle Q1 preview: Increased in home-consumption, better demand from rural and urban India, sustainable growth in and new products launches are some of the factors that analysts believe will drive growth for the fast-moving consumer goods (FMCG) maker in the January – March quarter of 2021.

Nestle, which is slated to report its for the March quarter on April 20, could post up to 14 per cent year-on-year (YoY) rise in Q1 net profit, while revenues could increase between 5-11 per cent. The company follows January – December financial year.

Analysts also expect gross margins to improve, led by benign input prices. Ebitda (earnings before interest, tax, depreciation and amortisation) margin, however, is likely to witness some pressure on account of higher employee cost and other expenses.

Shares of the firm have declined over 6 per cent on a year-to-date basis. During the three months-ended March 2021, they shed over 6.5 per cent as against a rise of 4 per cent in the BSE Sensex and 2 per cent in BSE FMCG index.

Here's what top brokerages expect from its Q1FY21 numbers:

ICICI Securities

The brokerage eyes a 11.8 per cent YoY jump in March quarter net profit at Rs 587.4 crore as against Rs 525.43 crore posted in the same period last year. On a quarter-on-quarter (QoQ) basis, the figure is expected to rise up to 21.5 per cent. The firm had posted a net profit of Rs 483.3 crore in the previous quarter.

Meanwhile, it expects Nestle to post a 10.8 per cent YoY increase in Q1 revenue to Rs 3,683.3 crore on the back of sustainable growth in Moreover, new products launches and distribution expansion in rural regions will also aid growth, it said.

The firm had posted a net profit of Rs 3,325.27 crore in the corresponding quarter last year and Rs 3,432.6 crore in the December quarter of CY20. Sequentially, the figure is expected to rise 7.30 per cent.

"We expect the company to maintain its operating margins at 23.7 per cent (11 bps lower). The increase in milk prices has been offset by cost cutting measures and rationalisation in media spends. The company was able to grow at a slower pace at 7.9 per cent in CY20 despite strong growth momentum in packaged foods mainly due to supply constraints in the noodles segment," the brokerage added.

Narnolia Financial

Analysts at Narnolia have more moderate expectations of a mere 1 per cent rise in March quarter profit at Rs 528 crore. While on a QoQ basis, the expect the figure to rise by 9 per cent.

They expect the revenue for the quarter under review to rise 5 per cent YoY to Rs 3,490 crore, led by increased in-home consumption, better demand from rural and urban India, traction from different channels and penetration led volume growth with secular growth across categories. Sequentially, they expect the figure to grow by nearly 2 per cent.

"The company’s in-home consumption portfolio in both foods and beverages categories such as Everyday Dairy Whitener, nestle a+ Milk, another milk-based portfolio, Nescafe, Ketchup and sauces and Maggie are expected to continue their positive trajectory," it said.

Gross margin is expected to improve by 240 bps to 58.7 per cent YoY while Ebitda margin is expected to decline by 68 bps YoY to 23.4 per cent YoY. Ebitda margins stood at 24.1 per cent and 22.1 per cent during Q1CY20 and Q4CY20, respectively.

Volume growth and performance of product portfolio along with movement in advertisement spends and other expenses are some of the key monitorables as per Narnolia analysts.

Edelweiss Financial

The brokerage eyes March quarter profit at Rs 6,00.6 crore, up 14.3 per cent YoY and 24.3 per cent QoQ. It also expects the revenue for the period to rise by 7.9 per cent yearly to Rs 3,588.8 crore while sequentially, the figure could grow by 4.6 per cent.

"Nestle is likely to see ~9 per cent YoY growth in domestic revenues on a base of 10.7 per cent. Q4CY20 saw 10.1 per cent YoY domestic revenue growth on a base of 10 per cent. Export revenue growth is likely to dip by 10 per cent YoY on a base of 12.9 per cent," Edelweiss Financial said.

Raw material prices have started inching up, however, cost optimisation measures should aid Ebitda margin expansion of 120 bps YoY, it added. The brokerage pegs Ebitda margin figure for the March quarter at 25.3 per cent.

Prabhudas Lilladher

The brokerage expects Nestle to post adjusted profit for the first quarter of CY21 at Rs 583.5 crore, up 9.5 per cent YoY, as against Rs 532.7 crore posted in Q1CY20. Adjusted profit could increase by 21.5 per cent QoQ from Rs 480 crore posted in the previous quarter.

"We expect Nestle to report 10.5 per cent revenue growth led by strong traction in Maggi, Chocolates, QoQ recovery in out of home consumption and increased focus on rural growth," the brokerage said. It pegs Q1 revenue at Rs 3,674.4 crore.

It eyes Ebitda margin to contract to 23.8 per cent led by higher employee cost and other expenditures.



Reference