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Informist, Monday, Jul 22, 2024

MUMBAI – Price hikes are likely to help Nestle India Ltd maintain high single-digit growth in revenue during the June quarter, as witnessed in the previous three quarters. The company managed to somewhat cushion itself from high commodity prices during the quarter as it passed on higher cost to end consumers, analysts said.

Its revenue during the quarter is expected to rise nearly 9% on year to 50.58 bln rupees, according to the average of estimates by 12 brokerages. The highest estimate was 51.48 bln rupees, while the lowest was 49.85 bln rupees.

The company is scheduled to report its earnings on Thursday.

Apart from price hikes, analysts said the company's sales growth was aided by new product launches and expansion of its distribution network in the rural areas. The company's popular instant noodles' brand 'Maggi' is expected to have seen a slight push in demand due to the seasonality of summer vacations amid rising competition, brokerage Prabhudas Lilladher said in its earnings preview.

The benefits of higher sales have likely trickled down to its profits, analysts' projections showed. However, there could be some moderation in profit growth compared to the previous quarter due to high commodity prices, especially that of coffee. Its net profit during the quarter is seen rising nearly 15% on year to 8.02 bln rupees, according to the average of estimates. The highest estimate for net profit was 8.24 bln rupees, and the lowest was at 7.47 bln rupees. 

The negative effect of high commodity prices is starkly visibile in the company's sequential performance. Brokerage Prabhudas Lilladher said that the average price of coffee during the quarter was up 16% on quarter and 19% on year at $220 per tn. The company's Apr-Jun net profit is likely to decline 14% and sales 4% as compared with the previous quarter.

Demand for products is seen improving during the quarter with Kotak Institutional Equities, Emkay Global Financial Services, and Nuvama Institutional Equities projecting a 4-5% growth in volumes as compared to the previous year. Prabhudas Lilladher expects a volume growth of 8.5%.

Among other metrics, the company's earnings before interest, taxes, depreciation, and amortisation are seen at 12.04 bln rupees, as per the average of 11 estimates. Its EBITDA during the same period in the previous year was 10.60 bln rupees, Kotak Equities said. 

Shares of Nestle India have largely traded in a range this year and have witnessed a fall of nearly 3% since the start of this year on the National Stock Exchange. Today, shares of the company closed 0.4% lower at 2,587.30 rupees.

Following are the Apr-Jun earnings estimates for Nestle India, in mln rupees, based on reports compiled by Informist from 12 brokerages:

End

US$1 = 83.66 rupees

Reported by Anshul Choudhary

Edited by Aditya Sakorkar

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