Raw material inflation may dent Nestle India's Q1CY23 margins YoY: Analysts

Nestle India Q1CY23 preview: While Indian business is likely to report double-digit revenue growth on a YoY basis, the international business is estimated to grow in mid-single digits, said analysts

Nestle India Q4 preview: FMCG major Nestle India's revenue growth is likely to be price-led, rising up to 14.5 per cent year-on-year (YoY) to Rs 4,557 crore in the January-March quarter of calendar year 2023 (Q1CY23), said analysts. The company will declare Q1CY23 results on Tuesday, April 25.
 

According to brokerages, the Indian business is likely to report double-digit revenue growth on a YoY basis, while the international business is estimated to grow in mid-single digits.  
 

On the margin front, analysts foresee up to 36 basis points (bps) contraction YoY to 23 per cent in Q4FY23, amid higher advertising spends, and raw material inflation.
 

Profit-after-tax (PAT), on the other hand, is expected to grow up to 13.2 per cent YoY to Rs 680 crore in Q4FY23 from Rs 600 crore in Q4FY22.  
 

At the bourses, shares of Nestle India gained just 0.4 per cent during the January-March period, as against a 3.03 per cent drop in the S&P BSE Sensex.

Key monitorables: Commentary on demand outlook in urban versus rural markets, competitive intensity, raw material price trends, consumption patterns, and seasonal outlook.
 

Meanwhile, here's what brokerages estimate for Nestle India's Q1CY23 numbers:
 

Axis Securities

Analysts expect the FMCG major to register 13 per cent YoY revenue growth to Rs 4,451 crore in Q4FY23, led by price hikes, and rural-led distribution expansion. Sequentially, they are expected to clock 5.1 per cent revenue growth. EBITDA margin, on the other hand, is forecasted to contract 36 bps YoY to 23 per cent, amid higher advertising spends.  
 

Sharekhan

The brokerage firm believes that the maggi maker's Indian business would report double-digit growth on a YoY basis, while the international business is expected to grow in mid single-digits. Sustained raw material inflation, however, would lead to 140 bps YoY contraction in gross margin, and 90 bps YoY drop in operating profit margins. Therefore, in-line with 7.5 per cent YoY increase in operating profit, PAT is expected to grow 8 per cent YoY.
 

Prabhudas Lilladher

Analysts forecast revenues to rise 14.5 per cent YoY to Rs 4,557 crore in Q4FY23 from Rs 3,980 crore in Q4FY22. Gross margins, however, are likely to decline 89 bps YoY, due to inflation in key input prices. EBITDA margins, further, are expected to contract 58 bps YoY to 22.8 per cent, in the March quarter. That apart, PAT is expected to climb 13.2 per cent YoY to Rs 680 crore in Q4FY23.
 

Motilal Oswal

The brokerage firm estimates growth momentum in sales to taper off, compared to preceding quarters. Meanwhile, higher contribution is expected from out-of-home consumption. Analysts remain watchful of commentaries on demand, and material costs. They remain 'neutral' on the counter, sharing a target price of Rs 19,900 apiece.