You are here: Home » Companies » Results
Business Standard
Web Exclusive

Nestle Q4 preview: PAT likely to grow 16-19% YoY; may announce dividend

The Maggi noodles maker is expected to post double-digit revenue growth in its profit after tax (PAT) for the fourth quarter of the financial year 2020

Topics
Nestle India | Q3 results | Markets

Saloni Goel  |  New Delhi 

Photo: Reuters
Commentary on recovery in trade channels and rural demand, new product pipeline and demand trends in packaged foods are among the key monitorables, according to analysts at HDFC Securities

A continued increase in in-home consumption and demand for packaged food along with festive season is likely to have driven the growth for fast-moving consumer goods (FMCG) maker during the December 2020 quarter, according to analysts, who see a nearly 10-13 per cent growth in revenue on a yearly basis.

However, on a sequential basis, the sales growth is likely to be flat or may dip marginally between 1-2 per cent, they believe.

Gross margins are likely to expand, led mainly by lower-cost inventory of milk which in turn is likely to drive the operating margins for the FMCG major. The profit for the period is expected to grow between 16-19 per cent on a yearly basis but could contract by 6 per cent sequentially.

During the October-December period, the firm jumped 15.5 per cent as against a 25 per cent rise in and 14 per cent gains in BSE FMCG index.

Commentary on recovery in trade channels and rural demand, new product pipeline and demand trends in packaged foods are among the key monitorables, according to analysts at HDFC Securities.

The firm, which follows January-December financial year, on February 9, 2021, informed exchanges that the board may consider a final dividend on February 16 when it would report its quarterly numbers.

Profit expectation

The Maggi noodles maker is expected to post double-digit revenue growth in its profit after tax (PAT) for the fourth quarter of the financial year 2020.

Sanjay Manyal, research analyst at ICICI Direct expects PAT to come in at Rs 552.1 crore, up 16.7 per cent YoY, but down 6 per cent quarter-on-quarter (QoQ). The firm had posted a net profit of Rs 473 crore in the same period last year and Rs 587 crore in the preceding quarter.

Brokerage Phillip Capital has similar PAT projection of Rs 549.1 crore that translates into 16.2 per cent growth yearly but a contraction of 6 per cent sequentially.

Analysts at Nirmal Bang, meanwhile, have the loftiest outlook of all of 19.7 per cent YoY growth in PAT.

Revenue projection

Sales growth during Q4FY20 will be driven by continuing increase in in-home consumption and festive season, said analysts at Emkay Global Research who see a 10 per cent jump in revenue at Rs 3,478.6 crore from Rs 3,149.3 crore posted in the same period last year.

Meanwhile, on a QoQ basis, the revenue is likely to slip by 2 per cent from Rs 3,541.7 crore posted in the preceding quarter of FY20.

Brokerage ICICI Direct has pegged revenue growth at 13 per cent YoY and 0.5 per cent QoQ at Rs 3,558.7 crore. "We expect Nestle to witness strong 13% sales growth on the back of an increase in inventory levels at the distributor end. Our channel check suggests that October sales were strong and November-December sales were muted. However, distributor level inventories have gone up 7-10 days," the brokerage said.

Meanwhile, analysts at HDFC Securities model an 11 per cent YoY revenue growth, led by continued demand for packaged foods.

Views on margin

Brokerage HDFC Securities expects 73 bps YoY expansion in gross margin on account of favourable base and product mix. "We model EBITDA margin expansion of 122 bps YoY to 23.5 per cent," it added.

Meanwhile, brokerage Phillip Capital said that benign milk prices are likely to drive gross-margin expansion while healthy operating leverage and cost-efficiency programme will boost EBITDA (earnings before interest, tax, depreciation and amortization) margin. It sees margin expansion of 118 bps YoY to 23.3 per cent.

Dear Reader,


Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

First Published: Mon, February 15 2021. 13:29 IST
RECOMMENDED FOR YOU