Nestle India Ltd

Result Update: Q3 FY 11

C.M.P: Target Price: Date:

Rs.3540.40 Rs.4001.00 March 19th 2011

BUY
SYNOPSIS

Stock Data: Sector: Face Value Rs. 52 wk. High/Low (Rs.) Volume (2 wk. Avg.) BSE Code Market Cap (Rs.In mn) FMCG 10.00 4199.40/2570.00 9757.0 500790 341365.3

Nestlé India, one the biggest players in FMCG segment, has a presence in milk & nutrition, beverages, prepared dishes & cooking aids & chocolate & confectionery segments. During the quarter ended, the robust growth of revenue is increased by 23.41% Rs.16755.20 million. Company’s manufacturing unit has expansion plans at Nanjangud, samalkha and ponda on track. Company has acquired land for new plant at Tahliwal.

Share Holding Pattern

1 Year Comparative Graph

Net Sales and PAT of the company are expected to grow at a CAGR of 18% and 19% over 2009 to 2012E respectively. Company had made domestic sales of Rs.5901.0 cr.

Nestle India Ltd

BSE SENSEX

Years CY 10 CY 11E CY 12E

Net sales 62736.4 72146.8 83690.3

EBITDA 12739.3 14623.3 17206.1

Net Profit 8186.6 9424.2 11157.7

EPS 84.91 97.74 115.72

P/E 41.70 36.22 30.59

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Kit Kat.25 22.37 37. Nestle India continuously focuses on understanding changing lifestyles in India.55 10.91 6. has a presence in milk & nutrition.40 167. second in healthy soups.38 9.80 96.9 EPS(Rs.2 in overall chocolate category. 2 . safe food products at affordable prices.(Rs.28 P/Bv(x) 24.13 2. & No.92 25. one the biggest players in FMCG segment.70 27.70 268. beverages.00 650.44 22. Nestlé India. As per the market-wise position Nestlé India stands first in instant noodles & ketchups. making it one of the oldest company in India. Nestle has created brands like Nestlé Milkmaid.50 Market Cap.3 168328.Peer Group Comparison Name of the company Nestle India ITC Dabur HUL CMP(Rs. The company has its headquarters at Gurgaon near Delhi and has seven factories spread all over India. Maggi Noodles.) 341365.68 Dividend (%) 485.0 585952. Nestlé India is a subsidiary of Nestlé SA of Switzerland. It started its journey in India in 1912 by entering into the dairy business. No.Mn.62 P/E(x) 41.1 in instant coffee.3 1296700. Nescafe & many more. prepared dishes & cooking aids & chocolate & confectionery segments.) 84. Polo. Nestlé Everyday.00 200.) 3540. Maggi Soups.00 Company Profile Nestle has its presence in India for around nine decades.00 1000. The company innovates new product & renovates existing one providing high quality. This helps it to foresee needs in hts product offerings.

13576. 2010.41% to Rs. Total income has increased by 23. 31.21.13% rise of net profit in its standalone earnings for the quarter ended Dec 2010. 2010 as compared to Rs 1129.60 million for the quarter ended Dec.10for the quarter ended Dec 31. 31.00 million for the quarter ended Dec. Quarterly Results . 2009 to Rs 16848.10 Dec-09 13576. During the quarter Net profit is increased to Rs 2034.20 11.20 million from Rs. Net sales for the quarter is surged by 23. 2009.50 million for the quarter ended Dec.Standalone (Rs in mn) As At Net sales PAT Basic EPS Dec-10 16755. The EPS of the company is stood at Rs. 31.41 80.60 1129.60 million as compared to same quarter corresponding year.13623.67% from Rs.13 80.20 2034.00 21.16755.71 %change 23.Segments Milk Products & Nutrition Beverages Prepared dishes & cooking Aids Chocolates & Confectionery Investment Highlights Q4 CY10 Results Update FMCG major Nestle India has posted 80.13 3 .20 million for the quarter ended Dec. 31. 2010.

2009 with growth of 25%.40 million. 4 . Recommendation of dividend Nestle India Ltd has recommended a final dividend for the year 2010 of Rs. when compared with last year.Break up of Expenditure CY10 performance Nestle India has disclosed a decent number of Net Profit for the year ended December 31 2010.50 per equity share (nominal value Rs.per equity share).27.91 with a growth of 25% over the last year. The company EPS is stood at Rs. 12.9.84. In addition to the two interim dividends for 2010.00 million for the year ended December 31. while total income for the year rose 22% to Rs 62974. 2010 whereas the same was at Rs 6550.00 million.10/.60 million for the year ended December 31.00 per equity share paid in May 2010 and November 2010 respectively.00 & Rs. Net profit after tax of Rs 8186. Net sales for the year are rose by 22% to Rs 62736. of Rs.

Increase of borrowing limits Nestle India Ltd has Proposed for approval of the shareholders. 2500 Crores. 5 . in aggregate. and taken on record the in-principle approval received from Reserve Bank of India for availing External Commercial Borrowings of upto USD 450 Million over a period of time. from the foreign equity holders for the funding of modernization / expansion of existing new projects and sourcing of capital goods. increase in the borrowing limits of the Company upto a maximum of Rs. in tranches.

80 13180.91 CY11E 12m 72146.25 10.26 -4447.50 10.20 4848.34 -11.50 11157.91 17206.57 -1430.10 -3264.97 -57789.60 -1277.in.77 -3756.90 -169.00 -50234.Financial Results 12 Months Ended Profit & Loss Account (Standalone) Value(Rs.19 15605.45 -1588.11 72412.01 10.80 10451.00 10.50 11451.70 -41219.76 964.00 84.25 964.60 964.80 51671.40 237.93 CY10 12m 62736.74 CY12E 12m 83690.00 115.70 12739.86 266.70 6550.50 10282.20 17014.90 171.60 62974.71 83991.52 9424.00 964.63 14623.20 7590.72 6 .00 67.71 17193.50 8186.40 -1112.30 -10.00 97.77 14611.36 300.70 -2619.06 -66784.70 9169.20 28172.mn) Description Net Sales Other Income Total Income Expenditure Operating Profit Interest Gross profit Deprecation Profit Before Tax Tax Profit After Tax Equity capital Reserves Face value EPS CY09 12m 51499.70 12728.16 -12.

72 7 .80 3467.in.00 964.10 31-Mar-11E 3m 18263.40 16848.22 3844.60 -13594.00 -861.20 3359.20 -3.00 -13108.90 2895.40 964.30 -305.04 -14519.mn) Description Net sales Other income Total Income Expenditure Operating profit Interest Gross profit Deprecation Profit Before Tax Tax Profit After Tax Equity capital Face value EPS 30-Jun-10 3m 14713.00 2034.Quarterly Ended Profit & Loss Account (Standalone) Value(Rs.20 10.20 10.87 18364.00 20.00 3252.20 10.60 -718.90 -1.90 -357.36 2479.20 1948.10 2974.67 31-Dec-10 3m 16755.00 22.17 100.50 -303.70 2970.93 -988.90 2666.21 30-Sep-10 3m 16414.80 -28.10 3843.00 25.00 55.50 -839.20 10.30 14768.82 -1.50 3331.00 16468.57 964.60 964.72 -375.20 93.70 3253.00 21.30 -11794.00 54.90 2185.80 3025.

42 20.72 8 .66 60.70% 163.65% 13.29 58.46 18.) P/BV CY09 96.25% 13.18 11.22 52.30% 23.27% 18.42 20.30% 64.Key Ratios Particulars No.7 95.05% 41.59 38.73 CY10 96.33% 30.42 20.42% 89.95% 32.56% 18.8 88.72 39.31% 18.81% 12.27% 13.12 112.34 186.99 CY12E 96. of Shares(In Million) EBITDA Margin (%) PBT Margin (%) PAT Margin (%) P/E Ratio (x) ROE (%) ROCE (%) EV/EBITDA (x) Book Value (Rs.72% 52.91 CY11E 96.06% 36.68% 198.86% 26.84 302.42 20.51% 19.29% 17.

Charts: 9 .

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shoe polish.40. the stock trades at 23.00 for Medium to Long term investment.115. Net Sales and PAT of the company are expected to grow at a CAGR of 18% and 19% over 2009 to 2012E respectively.72 x respectively for CY11E and CY12E.84 x for CY12E. These items are meant for daily of frequent consumption and have a high return. Industry Overview Fast Moving Consumer Goods (FMCG) goods are popularly named as consumer packaged goods. toothpaste. A major portion of the monthly budget of each household is reserved for FMCG products. The most common in the list are toilet soaps. Price to Book Value of the stock is expected to be at 18.22 x CY11E and 30. On the basis of EV/EBITDA. We expect that the company will keep its growth story in the coming quarters also. Earning per share (EPS) of the company for the earnings for CY11E and CY12E is seen at Rs. as the number of products the consumer use is very high. shampoos. shaving products.34 x for CY11E and 19. detergents. Items in this category include all consumables (other than groceries/pulses) people buy at regular intervals.3540. Competition in the FMCG sector is very high resulting in high pressure on margins 11 .4001. The volume of money circulated in the economy against FMCG products is very high.99 x and 11. We recommend ‘BUY’ in this particular scrip with a target price of Rs.74 and Rs.Outlook and Conclusion At the current market price of Rs. the stock is trading at 36.97.72 respectively.59 x CY12E respectively. household accessories and extends to certain electronic goods. packaged foodstuff.

intense competition between the organized and unorganized segments characterizes the sector. According to a study by research firm The Nielson Company. rural consumers spend about US$ 9 billion per annum on FMCG items and product categories such as instant noodles.85. A well-established distribution network. the fast moving consumer goods market (FMCG) in rural India is tipped to touch US$100 billion by 2025 on the back of "unrelenting" demand driven by rising income levels. At present. New entrants who wish to bring their products in the national level need to invest huge sums of money on promoting brands. as per the findings. deodorant and fabric. Manufacturing can be outsourced. According to the study.85. Companies spend a large portion of their budget on maintaining distribution networks. According to a FICCI-Technopak report.000 crore is the fourth largest sector in the economy. Also the market is more pressurized with presence of local players in rural areas and state brands Scope of the Sector The Indian FMCG sector with a market size of Rs.000 crore FMCG market in India is growing at a fast pace despite of the economic downtrend.FMCG companies maintain intense distribution network. The report states that implementation of the proposed goods and services tax (GST) and the opening of foreign direct investment (FDI) are expected to fuel growth further and raise the industry's size to US$ 47 billion by 2013 and US$ 95 billion by 2018. rural India accounts for more than half of sales in some of the largest FMCG categories. with the pace of consumption growing much faster than urban areas. 12 . The Rs. India's FMCG sector is poised to reach US$ 43 billion by 2013 and US$ 74 billion by 2018. The changing profile and mind set of the consumers has shifted the thought to “Value for Money” from “Money for Value”. A recent phenomenon in the sector was entry of multinationals and cheaper imports. The increasing disposable income and improved standard of living in most tier II and tire III cities are spearheading the FMCG growth across the nation.

plans to invest US$ 50. The fast moving consumer goods (FMCG) sector is expected to grow 13 per cent during FY 2010-11 on the back of strong economic growth.e.“The industry will witness a spate of acquisitions & mergers in the 2010.49 million to set up its first research and development (R&D) centre in India at Manesar in adjoining Gurgaon district. On the contrary.93 million. Major investments Some of the major investments in the industry are: Chennai-based FMCG company CavinKare is planning to invest around US$ 109. cool drinks in the North and others.50 million over the next two years in various expansion plans. Tamil Nadu at an investment of US$ 25.” by an analyst based in Mumbai. has inaugurated their Research and Development and manufacturing facility in Hosur. the fast moving consumer goods major. Over the years companies like HUL. In addition companies have been successful in reviving their presence in the semi-urban and rural markets. • • 13 . Packaged consumer goods company GlaxoSmithKline Consumer Healthcare (GSKCH) plans to invest over US$ 64. Colgate Palmolive and Britannia Industries are strong in single product category i. • • Nestle. ITC and Dabur have improved performance with innovation and strong distribution channels. a good monsoon and subsequent rise in rural income. The facility will be made operational by July 2012. according to an industry body. tooth pastes and Biscuits. Their key categories have strengthened their presence and outperformed peers in the FMCG sector.87 million on repositioning milk food drink Horlicks as the company’s umbrella brand. FieldFresh Foods . joint venture of the Bharti Enterprises and Del Monte Pacific Ltd. There will be a renewed focus on rural consumers too. including a greenfield facility for namkeen at Thane.

Atlanta-based Coca Cola Company plans to invest up to US$ 120. India • • ________________ ____ _________________________ Disclaimer: This document prepared by our research analysts does not constitute an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. Firstcall India Equity Advisors Pvt. 14 . This document is provide for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision. or any of it’s affiliates shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Soft drinks and snacks major Pepsico is planning to invest US$ 500 million in India in the next two years. Ltd.• Agri solutions provider Buhler India plans to invest US$ 22.49 million turnover by 2014.55 million in an integrated manufacturing unit and other expansion projects in the next four years. in line with its plans to achieve US$ 225. The information contained herein is from publicly available data or other sources believed to be reliable but do not represent that it is accurate or complete and it should not be relied on as such.75 million to set up a new bottling plant in Karnataka.

Equity & Debt Syndications and Structured Deals. valuation of business. For Further Details Contact: 3rd Floor. F.com www.Sankalp. IPO’s.R. QIP’s.Chembur.Firstcall India Equity Research: Email – info@firstcallindia. Short Term Funds Management Debt & Equity.Marg.com 15 .P. Placement of Equity / Debt with multilateral organizations.Ltd focuses on. spin-offs. Corporate Advisory Offerings include Mergers & Acquisitions(domestic and cross-border). corporate restructuring-Capital and Debt. Ashakirankumar Automobile A. Prathap IT D.Dr.Lavanya Oil & Gas A. GDRs. Rajesh Babu FMCG H.Mumbai 400 071 Tel.firstcallindiaequity. Project Financing.O’s. ADRs and listing of the same on International Stock Exchanges namely AIMs. Offer for Sale and Buy Back Offerings.com C.V. Corporate Finance Offerings include Foreign Currency Loan Syndications. : 022-2527 2510/2527 6077/25276089 Telefax : 022-25276089 E-mail: info@firstcallindiaequity. Turnkey Corporate Revival – Planning & Execution.L. Private Equity and Financial Joint Ventures Firstcall India also provides Financial Advisory services with respect to raising of capital through FCCBs. divestitures.The Bureau.C.Kameswari Pharma U.Prathibha Diversified Dheeraj Bhatia Diversified Manoj kotian Diversified Nimesh Gada Diversified Firstcall India also provides Firstcall India Equity Advisors Pvt. Working Capital Limits. Singapore Stock Exchanges and other international stock exchanges.S. Luxembourg. Venture capital.Takeover Offers. Janaki Rao Capital Goods B.

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