Nestle India - Setting Up New Building Blocks: Motilal Oswal

Motilal Oswal Report

Nestle India Ltd.’s CY22 annual report highlights its underlying strengths and the company remains one of the strongest revenue growth opportunities in the Indian consumer universe. The key takeaways are as follows:

• The company’s overall volume growth in CY22 stood at only ~5%, as it was adversely impacted by a sharp dip in volumes towards the end of the year. Given the unfavorable operating environment, Nestle India’s volume growth was healthy and better than its peers. The company does not disclose volume growth in its interim results. In CY22, the company witnessed strong volume growth in beverages (up ~14% YoY) and chocolate and confectionery (up ~12% YoY).

• On the other hand, volume growth was muted in the case of prepared dishes and cooking aids (up 5.7%, lowest since the Maggi crisis in 2015). Since prepared dishes constitutes ~61% of total volumes versus ~32% of sales, the company’s overall volume growth was adversely impacted.

• Volumes in milk and nutrition (41%/23% of total sales/volumes) were flattish in CY22, continuing with its disappointing trend. The segment has been reporting flattish volumes/decline in volumes for the past four out of five years. Volume growth has been robust across the other segments. Prepared dishes and confectionery segments have clocked double-digit volume compound annual growth rate since 2016, when Mr. Suresh Narayanan took charge. Milk and nutrition tonnage in CY22 was in line with CY09 levels

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