INSUBCONTINENT EXCLUSIVE:
ET Intelligence Group: Nestle India’s stock gained 6 per cent on Thursday following the company’s strong outlook
It has been gradually increasing market share across categories along with margin expansion
In addition, the company’s volume growth was impressive
The Thursday’s price jump has taken the total gain over the past six months to 52 per cent reflecting investors’ confidence in the
company’s growth prospects.
The roadmap that the top management created for the Indian subsidiary of Swiss-headquartered Nestle after the
Maggi fiasco in 2015 seems to be working
Analysts that attended the company’s meet on Tuesday said the company’s commentary on strategy and execution was the biggest take
away.
The company’s strategy can be summarised into two parts
First, the regional base cluster approach has helped not only in growing the core business but also to aggressively launching new products
At the same time, its relationships with the trade partners have also rejuvenated, say industry trackers.
Second, Nestle adopted a more
aggressive strategy of “willing to fail fast” over “first time right”
This enabled it to bring in new innovative products and change its image from a Noodle and Coffee company
For instance, it launched 38 new products and discontinued 11 products in the past two months.
Although the new products contributed 3 per
cent to the revenue in the first half of 2018 (2.5 per cent last year), the share is expected to keep growing in the coming years
This means, the core business, too, is doing well.
The strategies reflect in the company’s growth
The year-on-year volume growth (company does not share it in the interim results) for the past six quarters was 11.3 per cent, 7.7 per cent,
8.9 per cent, 18 per cent, 6.9 per cent and 11.5 per cent respectively
Net Sales growth for the latest quarter was 12.2 per cent
The 400 basis points operating margin before depreciation (EBIDTA margin) jump to 24 per cent resulted in 50 per cent growth in net profit
Some analysts expect adjusted net profit of Rs 1,750 crore in calendar year (CY) 2018 and Rs 2,000 crore in CY19 compared with Rs 1,350 in
CY17 At the market cap of Rs 1.1 lakh crore, the stock is available at 62 times the CY19 earnings
This compares with the multiples of 67 for HUL and 85 for PG Hygiene Healthcare.
