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Prabhudas Lilladher Report
We cut CY23/24 earnings per share estimates of Nestle India Ltd. by 3.5%/2.7% following 118 basis points QoQ gross margin slippage in Q3 CY22 despite double digit topline growth and strong momentum across key brands.
Growth momentum was intact across large metros and smaller towns and across channels particularly modern trade and out-of-home. Medium to long term growth drivers remain intact led by-
sustained expansion in rural reach (~ 20% of sales),
availability of capacity in Maggi post expansion,
huge scope of growth in segments like coffee, ready-to-drink and chocolates and
channels of future like e-commerce as well as newly launched direct-to-consumer website platform - mynestle.in (7.2% of revenues).
Although we expect Nestle India to gain from lower costs of palm oil while firm prices of food grains, coffee and milk might prevent a sharp uptick in margins in near term.
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