KARV Y ||| EEE odtber38,2012 Nestle India 3. Pressure on Return Ratios ~ Marginal Improvement Likely in CYI4E Higher capex on expanding manufacturing capacities and lower incremental demand has given significant pressure on Nestlé India return profile. ‘The ‘Company's RoCE & RoE are expected to be 67% and 65% by CY12-end, compared t0 140% & 96% in CYI0. Exhibit 18: ROCE Trend and Expectation Exhibit 19: ROE Trend and Expectation 2000 1200 1009 1500 800 1000 600 400 500 200 cys CYOR CHO CY CYRE CYIBE CYME cvs COD CYIO. CYIT CYRE CYISE CYMME BROCE (%) ROE (%) Source: Company, Karey Institutional Resear ‘Source: Company, Karey Institutional Research Our View: Though higher focus on volume growth and better discretionary spend by the consumers would marginally improve Nestlé India’s return profile in CYIE, it would be far to reach CY10 levels. Exhibit 20: Key Assumptions Key Assumptions cy cyt cyme cys cre Sales Growth (%) a8 198 135 78 173 Volume Growth (%) wo 68 27 ns 132 Gross Margin (%) 512 sal 542 539 539 SG&A (% of net Sales) 70 163 168 wa 170 EBITDA Margin (%) 2A 208 az a3 23 [Effective tax rate (%) 285 307 310 20 20 DPS (Rs) 485 485 605 76 908 ‘Source: Company, Karey Institutional Research 7KARV Y ||| EEE Financials Exhibit 21: Profit and Loss Statement October 18,2012 YIE Dee (Rs ma) cy ot Net Revenues 62609 74994 % Growth 218 198 Raw Material 30555 35.804 Staff 4am 5465 (ther Expenses 15160 18021 Total Expenditures 50,050 59,380 EBITDA, 12559 156141844 % Growth 22 0438 EBITDA Margins (%) 21 208 2. Other Income 365 wm 5a Interest a 51 538 Depreciation 1278 332.508 Profit Before Tax 1145213879 15,78 3264 42644766 2%5 3071 Reported PAT S188 9,616 10,608 % Growth 2000 17a 10a ‘Adjusted Net Profit 8188 9.616 10.608 % Growth 215 74 103 ‘Source: Company, Karey institutional Research Exhibit 22: Balance Sheet YEE Dee (Rs ma) cy cn eye Equity Share Capital 36 964 36 Reserves & surplus 7590 11,775 15,608 Shareholders’ funds 8554 12,740 16,873 Total Debt = 9708 12,708 Capital Employed S551 22448 29,281 Net fied assets 13616 29,943 36,440 Cash & Cash Eq 3 _2a71 Net Other current assets (8789) 10,676) (999) Investments 15051341505 Mise Exp not written off Net Deferred tax Assets a3) 35) 60) Total Assets 8554 22448 29,281 “Source: Company, Karay institutional Res mh Nestle India CYBE _ CYME 100252 117,610 78 173 46217 54257 2PB 93 2age1 29201 78881 92,581 aiasl 25,030 159 va ms 23 v7 730 807 72 3560 3.900 17487 20,585 4981 5961 20 90 12203 14,598 150 196 12203 14,594 196 CYBE_CYIaE oe 36 ws 19,776 1gas6 20,740 14208 12,208 33064 32,948 39880 35,980 3,498 8751 (133) (12479) 1,505 1.505 (685) (10) 33064 32,948KARVYiIIl STOCK BROKING October 18,2012 Nestle In Exhibit 23: Cash Flow Statement YPE Dec (Rs ma) x0 Om CYRE OBE CKE Par Tal —1aa79~—~«CWS ~~ ~=~«DO RS Depreciation 1278 15% 2,504 3,560 3,900 Tax 207) G60) BIT) 4.85) 836) (Change in Wig Cap, 756 (ass (7 Lis 1345 CF from Operations 10368 «1187613098 17,830 (20,756, Capex (4459) (15852) (@,000) (7,000) Investments 526 : (asi) . CF from Investing 933) 8882) 161) (7,000) (Change in Equity : : - - (Change in Debt : 8.652 3,000 1,500,000) Dividends & others (4649) 835) B52) (10.94 CF from Financing 322 (4313) —@.227) ‘Change in Cash a) 676) 1.603 “Source: Company, Kero Tstitational Research Exhibit 24: Key Ratios YIEDee evo cy Cyne CYBE CYNE Raw Material CostSales (2) os 99 GS “1 461 Manpower CostSales (%) 68 73 77 77 7 Operating & Other CostSales 42 OB Revenue Growth (%) 1s 8B 78 173 EBITDA Margins (%) wr mem Net Income Margins (%) BI RSs 22 124 ROCE (4) M68 68583780 ROE (%) 5 ot 704 “Sources Company, Keroy Istitadional Research Exhibit 25: Valuation Parameters YIEDee eyo Cyn Cyne CME CVE EPS (RS) uo 87 ~«CNODS~S~«SRG HSC PEG) 56107 3H BV (Rs) 887 tA PIV (x) 537360 EVIEBITDA (9) 362 SAD 184 Fixed assets turnover ratio (x) 25 23 25 33 Net DebvEquity §) 06 07 06 EV/Sales 62 47 ‘Sour: Company, Karoy Institutional Research