Motilal Oswal: Nestle India’s Sales Below Expectations, Ebitda In-Line  
Packets of Maggi 2-Minute Noodles and Xtra-delicious Magical Masala, both manufactured by Nestle India Ltd., are displayed for sale at a general store in Mumbai, India. (Photographer: Vivek Prakash/Bloomberg)  

Motilal Oswal: Nestle India’s Sales Below Expectations, Ebitda In-Line  

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Motilal Oswal Report

Nestle India Ltd.’s revenues for the quarter disappointed, weighed by ephemeral lockdown issues, which impacted manufacturing. We believe this would not pose much of a challenge going forward.

Ebitda margins were in-line likely due to advertisement spend cuts, aligned with peers that have reported their results thus far.

Gross margins contracted 190 basis points YoY to 56.3% on higher commodity costs, particularly the cost of milk and its derivatives.

Higher staff costs as a percentage of sales (up 170 basis points YoY to 12.1%) and lower other expenses as a percentage of sales (-440 basis points YoY to 19.4%) led to Ebitda margin expansion of 80 basis points YoY to 24.9% (estimate 23.8%) in Q2 CY20.

Nestle remains among the best structural plays in the Indian Consumer space, led by: (a) massive growth opportunity in the Indian Foods space, and (b) the evident revival in top line and earnings momentum ahead of peers in recent years.

Click on the attachment to read the full report:

Motilal Oswal Nestle India Q1FY21 Result Update.pdf

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