Nestle India to announce Q3 numbers today; here's what to expect

EBITDA is likely to grow by 15.7 per cent YoY to Rs 878.5 crore, says Nirmal Bang Securities.
Shares of Nestle India were trading flat with a positive bias in the morning deals on Friday ahead of its September quarter results due later in the day. Nestle India follows January-December fiscal year, hence it would be the third quarter numbers for the fast-moving consumer goods (FMCG) major. 

At 09:30 AM, the stock was trading 0.67 per cent higher at 16,018.25 levels as compared to a 0.46 per cent rise in the benchmark S&P BSE Sensex.  The stock had hit an all-time high of Rs 18,301 on April 17, 2020. 

On Wednesday, the company reported a 'mid-single-digit growth' in the Indian market in the July-September quarter, helped by its popular brands Maggi, Nescafe, and KitKat. Overall, the South Asian market has "continued to perform well", Nestle said in a statement.

The Indian market was ranked at number 13 in terms of contribution to Nestle's global revenue in 2019. Nestle's South-East Asia market also maintained mid-single-digit growth. READ MORE

As regards its financial result for the July-September period, analysts at Emkay Global expect net sales (revenue) of the company to grow 7.4 per cent year-on-year (YoY) and 13.2 per cent quarter-on-quarter (QoQ) to Rs 3,454.4 crore. The brokerage notes that the sales growth will be driven by continuing increase in in-home consumption and lesser supply disruption as compared to the June quarter. 

Earnings before interest, taxes, depreciation, and amortisation (EBITDA) is seen at Rs 843.9 crore, up 15.7 per cent YoY and 17.6 per cent QoQ while EBITDA margin is seen at 24.4 per cent, up 174 bps YoY and 91 bps QoQ aided by controlled overhead costs. Profit after tax (PAT) is seen at Rs 602 crore, up 21.7 per cent QoQ. On a YoY basis, however, numbers will remain unchanged. 

"After seeing a deterioration in its sales growth rate in 2QCY20 on account of disruption in production due to the Covid led lockdown, we expect Nestle to bounce back with an 11.5 per cent YoY sales growth at Rs 3,585.6 crore in 3QCY20," Nirmal Bang Securities said in a result preview note. On a sequential basis, sales will grow by 17.5 per cent.  

The EBITDA margin is likely to expand by 88bps YoY to 24.5 per cent on account of lower other operating expenses as a percentage of sales. EBITDA is likely to grow by 15.7 per cent YoY to Rs 878.5 crore while adjusted PAT is likely to decline by 2.3 per cent YoY to Rs 589.7 crore on account of lower depreciation and tax in the base quarter.


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