 "Nestle Q3 preview: Analysts expect profit to slip 5% YoY, margins contract")
Kitkat and Maggi maker Nestle India is set to announce its Q3FY25 numbers on Friday, January 31, 2025. In the third quarter (Q3FY25) brokerages tracked by Business Standard expect Nestle's adjusted net profit to decline 4.9 per cent in the quarter ended December 31, 2024, on average, to Rs 725.06 crore as compared to Rs 762.9 crore a year ago. On a sequential basis, the PAT is expected to rise 4.2 per cent.
The revenue for the December quarter on average is pegged at Rs 4,868.86 crore as compared to Rs 4,600.42 crore a year ago which implies a rise of 5.8 per cent. The rise in revenue will be led by growth in volumes.
However, on a quarter-on-quarter (Q-o-Q) basis, the revenue is estimated to slip 4.6 per cent. Increased competitive intensity in infant nutrition, the undoing of price laddering in bundle packs of Maggi, and downtrading in the coffee business may weigh on revenue growth on a sequential basis. ALSO READ: Sun Pharma Q3 Results Preview: Profits may jump 13%, revenues to rise 10% YoY
Analysts and investors will keep an eye out for management's commentary on demand and growth outlook.
Here's how brokerages expect Nestle to fare in Q3:
Motilal Oswal: The brokerage expects sales growth of 5 per cent year-on-year (Y-o-Y) with improvement in demand. Analysts expect a moderation in gross profit and Earnings before interest, tax, depreciation, and amortisation (Ebitda) margins due to a rise in raw prices.
The gross profit for Q3 is pegged at Rs 2802.3 crore as compared to Rs 2845.2 crore a year ago. Ebitda is likely to come in at Rs 1168.4 crore as compared to Rs 1246.8 crore a year ago. Ebitda margin is expected at 24.1 per cent as compared to 24.8 per cent a year ago. Nestle is anticipated to focus on expanding its distribution reach.
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Nirmal Bang: As per the brokerage the company is likely to post a topline growth of 7.5 per cent Y-o-Y led by 4 per cent estimated growth in volume in 3QFY25.
Gross margin is likely to decrease by 210 basis points (bps) Y-o-Y, to remain flat Q-o-Q due to the steep rise in tea and coffee prices. Analysts expect the Ebitda margin to contract by 100 bps Y-o-Y and remain flat Q-o-Q to 23.2 per cent.
While Ebitda is likely to grow by 3.1 per cent Y-o-Y to Rs 1,147 crore and adjusted PAT is likely to decrease by 1.3 per cent Y-o-Y to Rs 743.8 crore.
HDFC Securities: HDFC Securities analysts see the increased competitive intensity in infant nutrition, the undoing of price laddering in bundle packs of Maggi, and the downtrading in the coffee business to weigh on revenue growth on a sequential basis.
They peg overall revenue at Rs 4,812.8 crore as compared to Rs 5,074.8 crore in Q2.
Additionally, inflationary pressure in coffee, palm oil, wheat, and cocoa, along with weak revenue growth will likely hamper operating margin.
The brokerage pegged Ebitda for the quarter under review at Rs 1,022.2 crore as compared to Rs 1,109.5 crore a year ago. Ebitda margin is expected at 21.2 per cent as compared to 21.4 per cent a year ago.