ICICI Direct: Nestle India Hit By Supply Chain Constraints In April

BQ Blue’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages. These reports offer BloombergQuint’s subscribers an opportunity to expand their understanding of companies, sectors and the economy..ICICI Direct Report.Nestle India Ltd. reported muted revenue growth of 2% in Q2 CY20 with manufacturing and supply chain operations remaining disrupted in April.The domestic sales growth was 2.6% while exports de-grew 9.3%. We believe supply in April was normal only for milk products and all other categories witnessed resumption of manufacturing in slow and gradual manner.The quarter witnessed a strong growth in ‘Everyday’, ‘Nestlé a+’ and ‘Milkmaid’ mainly due to very high sales in initial weeks of April. We believe the company anticipated large scale disruption in milk supply or shift in consumer demand from pouch to powder and ultra high temperature milk.However, pouch milk supply disruption did not last longer than few weeks, resulting in piling up of ‘Everyday’ inventory at the end of distributors. We believe milk products would see inventory rationalisation at the distributor level given demand conditions from hotels, restaurants and airline remain muted.Operating profit saw growth of 7.2% with margins expanding 127 basis points. The margin expansion was led by cost cutting measures and reduction in advertisement and promotion spend (overhead spends down 487 basis points) partially offset by the 193 basis points contraction in gross margins.Given the reduction in corporate tax rate, net profit increased 11.1% to Rs 486.6 crore (our estimate Rs 502.7 crore). Notably, e-commerce channel sales grew by 122% contributing now 3.6% of sales..Click on the attachment to read the full report:.DISCLAIMERThis report is authored by an external party. BloombergQuint does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the brokerage and do not represent the views of BloombergQuint..Users have no license to copy, modify, or distribute the content without permission of the Original Owner.

ICICI Direct: Nestle India Hit By Supply Chain Constraints In April

ICICI Direct: Nestle India Hit By Supply Chain Constraints In April

Choose a plan