Nestle India
BSE SENSEX
10,388
S&P CNX
11,571
21 August 2018
Update
| Sector:
Consumer
CMP: INR10,888
TP: INR10,620(-2%)
Neutral
Good going, good prospects but fairly reflected in valuations
We attended Nestle India’s (NEST) Analyst Meet 2018. Key takeaways:
Over the past six quarters (starting 1QCY17), NEST’s volumes have increased
impressively at 11.3%, 7.7%, 8.9%, 18%, 6.9% and 11.5% YoY (note that volumes
data was not shared in the interim quarterly results).
NEST has been able to expand its market share in pasta and coffee (claims to be the
market leader again). The share in other categories has been stable.
Domestic volume growth was mixed in 1HCY18. Prepared Dishes & Cooking Aids
(PDCA) and Powdered & Liquid Beverages volumes grew at a strong 12.8% and 9.2%,
respectively. On the other hand, Milk products & nutrition (M&N) and Confectionary
volumes grew at a relatively slow rate of 4.6% and 6.1%, respectively.
New products contributed 3% of sales in 1HCY18, as against 2.8% in the year-ago
period (2.6% in CY17). Of the 36-38 new products launched recently, around 25 have
been retained. The rest did not scale up as expected, and thus, were either culled or
pulled back to the drawing board.
Comparable gross margin improved 400bp YoY in 1HCY18, majorly contributing to
the 470bp comparable EBITDA margin expansion. Management indicated that
material prices are on an uptrend and that price increases, if any, may not be
commensurate with cost increases.
Pet care products were not launched in the listed entity, which management
attributed to (a) the lack of synergies between customers and channels and (b) the
lack of expertise of the listed company management in this space. The breakfast
cereal product
NesPlus
has received good response online just within a few weeks of
its launch.
Among the various points discussed in the analyst meet, we were particularly
enthused by the volumes outperformance of 200bp (not shared in interim results)
versus our estimate, which consequently prompted us to raise our sales and PAT
forecasts for FY19. While the sales prospects appear promising for CY18 and CY20
(highest for Nestle since CY11), the risks on the margins front are high, particularly
after the windfall gross margin gains in 1HCY18. This is mainly because material
costs have started trending up and management has stated its intention of
protecting growth even if it means lower price increases than in the past in response
to material cost movement. We, thus, maintain our Neutral rating with a target price
of INR10,620 (49x Sep’20E EPS).
Stock Info
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Free float (%)
NEST IN
96
1049.8 / 15
11000 / 6585
0/30/42
517
37.2
Financials Snapshot (INR b)
2017 2018E
Y/E Dec
Net Sales
100.1 112.0
EBITDA (INR b)
22.2 27.8
Net Profit
13.5 17.4
EPS
140.0 181.0
EPS Gr. (%)
13.2 29.2
BV/Share (INR)
354.8 390.8
RoE (%)
40.3 48.5
RoCE (%)
41.7 50.1
P/E (x)
77.8 60.2
P/BV (x)
30.7 27.9
2019E
126.5
30.1
19.1
197.8
9.3
395.6
50.3
52.0
55.0
27.5
Shareholding pattern (%)
Jun-18 Mar-18 Jun-17
As On
Promoter
62.8
62.8
62.8
DII
8.1
8.3
7.2
FII
12.2
11.9
12.6
Others
16.9
17.0
17.5
FII Includes depository receipts
Stock Performance (1-year)
Nestle India
Sensex - Rebased
11,200
9,900
8,600
7,300
6,000
New products – mostly retained, fueling domestic growth
New products/innovations contributed 3% of domestic sales in 1HCY18, as
against 2.8% in 1HCY17 (2.6% in CY17). Of the 36-38 new products launched
recently, around 25 have been retained. The rest did not scale up as expected,
and thus, were either culled or pulled back to the drawing board.
Nescafe
RTD,
Munch Nuts, Milkybar
variants,
Ceregrow
and
KitKat
variants
have performed well.
On the other hand,
Pro Grow, Everyday
masala fusion and
Sunrise
Insta Filter
have not lived up to the expectations. The key reason was the difference
between the intention of the product and the consumer perception.
Krishnan Sambamoorthy – Research Analyst
(Krishnan.Sambamoorthy@MotilalOswal.com); +91 22 6129 1545
Vishal Punmiya – Research Analyst
(Vishal.Punmiya@MotilalOswal.com); +91 22 6129 1547
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
 Motilal Oswal Financial Services
Nestle India
Other key highlights:
Company v/s listed peers growth
a) CY16 was sluggish (company: +6.4% v/s listed peers: +12.8%) due to a slow
recovery post Maggi crisis.
b) CY17 (company: +11% v/s listed peers: +9.2%) was good with an
outperformance versus industry.
c) 1HCY18 (company: +13.6% v/s listed peers: 14.8%) was a period of slightly
slower growth than industry. This was because the industry was more
affected by GST destocking and the recovery from this was relatively fast.
Volumes grew ~9% in 1HCY18, while adjusted value growth was 13.8% in the
domestic business.
NEST commands a market leadership in ~85% of its portfolio.
6 out of the top 10 brands in chocolates and confectionary belong to NEST (the
company is not in the top 2, though).
A&P increased 14% YoY in 1HCY18, in line with adjusted sales growth. There has
been no significant increase in adspend over the past two years, despite a spate
of new launches.
Private labels: Around 8-10 years ago, NEST believed that private labels were a
long-term threat, but the power of brand has been an important factor, and
thus, there has been an impact just at the fringe.
Whey protein product will be advertised well; NEST has tied up with a few gyms.
Dairy whitener growth is slightly higher than infant nutrition in the M&N
segment.
Company underlined the eight essential Ms for Nestle:
Mindset of growth
Method and plan
Meaning and outcomes
Mastery of execution
Might lies in detailed clusters (explanation below)
Managing infrastructure to match growth – Back to same distribution as before
Maggi crisis now
Magic of people
Music of performance
What is the consumer cluster approach mentioned above?
Earlier, clusters were based on brand and state lens, consumer targeting was
based on past precedence, while new product development (NPD) was based on
legacy and past performance.
NEST would be adopting a cluster approach (Many Indias within India) with a
need to update its view of Consumer India. Thus, it is becoming more efficient in
reaching out to customers, similar to what some regional players and start-ups
have been doing to connect with customers with high agility.
The company is looking at what sells where, who buys what and why, and
varying consumer potential.
NEST now has 15 clusters, including three clusters per geographical branch
(north, south, east and west zones) plus three metro clusters. This facilitates
21 August 2018
2
 Motilal Oswal Financial Services
Nestle India
better planning, problem solving, performance tracking, resource optimization,
and empowerment at local levels.
HR Practices, Health and Environment
High-performer attrition was only 3% in CY18 versus 7% in CY15, 6% in CY16 and
4% in CY17. NEST is among the top three employers (from premier management
institutes) in the FMCG space in India.
It has among the lowest levels of talent attrition, despite a large proportion
(around 70%) of the organization comprising of millennial.
Women represent 18.5% of overall employee count, 14.9% of managerial
personnel and 17% of field force. 71% of management trainees and 63% of
technical trainees are women, signifying NEST’s effort to make the organization
more inclusive.
The company reduced sodium by 10% in recent years. It is targeting an average
annual reduction of 6% in sodium, 10% in salt and 2.5% in total fat. At the same
time, it will not compromise on the taste of its products.
NEST also remains committed to reduce the use of plastic (1500 MT of plastics in
packaging reduced so far).
Valuation and view
Among the various points discussed in the analyst meet, we were particularly
enthused by the volumes outperformance of 200bp (not shared in interim
results) versus our estimate, which consequently prompted us to raise our sales
and PAT forecasts for FY19. At the same time, we also note that the current-year
margins have been largely propped by extremely muted material costs.
While the sales prospects appear promising for CY18 and CY20 (highest for NEST
since CY11), the risks on the margins front are high, particularly after the
windfall gross margin gains in 1HCY18. This is mainly because material costs
have started trending up and management has stated its intention of protecting
growth even if it means lower price increases than in the past in response to
material cost movement.
While NEST is on a much stronger footing than any time in the current decade,
valuations of 48.8x CY20E EPS fairly capture these prospects, in our view. We,
thus, maintain our Neutral rating with a TP of INR10,620 (49x Sep’20E EPS).
Reported
6.3
8.9
4.6
9.2
7.1
Comparable
10.8
15.0
15.3
23.6
13.8
Volume
4.6
12.8
6.1
9.2
9.2
Exhibit 1: Broad-based growth supported by an increase in volumes
Domestic category growth in 1HCY18 (YoY - %)
Milk Products & Nutrition
Prepared Dishes & Cooking Aids
Confectionery
Powdered & Liquid Beverages
Overall domestic
Source: Company, MOSL
21 August 2018
3
 Motilal Oswal Financial Services
Nestle India
Exhibit 2: Momentum in volume growth and margin continues
Domestic volume growth
Domestic organic growth (comparable)
Operating profit as a % of sales
17.0
11.3
9.7
7.7 8.8
15.4
8.9 9.1
19.1 18.0 18.1 18.5
13.4
6.9
21.4
14.5
11.5
20.3
1QCY17
2QCY17
3QCY17
4QCY17
1QCY18
2QCY18
Source: Company, MOSL
Exhibit 3: Domestic comparable sales grew 13.8% in 1HCY18
Source: Company, MOSL
Exhibit 4: Increasing contribution of innovations to domestic
sales
Contribution of innovations to Domestic Sales (%)
2.6
1.5
2.8
3.0
Exhibit 5: Volume growth stood at 11.5% YoY in 2QCY18 on
a base of +7.7% YoY
Domestic sales quantity ('000 tons)
Tonnage growth (%)
18.0
11.3
7.7
11.5
8.9
6.9
96
4QCY17
101
1QCY18
105
2QCY18
94
CY16
CY17
1HCY17
1HCY18
1QCY17
94
2QCY17
97
3QCY17
Source: Company, MOSL
Source: Company, MOSL
21 August 2018
4
 Motilal Oswal Financial Services
Nestle India
Exhibit 6: Region-wise contribution to domestic sales in 1HCY18
Region
North
East
South
West
Total
Contribution (%)
27
31
24
18
100
Reported growth YoY (%)
7.9
9.4
3.9
6.9
7.1
Comparable growth YoY (%)
14.6
16.2
10.4
13.6
13.8
Source: Company, MOSL
Exhibit 7: Input cost has declined YoY in 1HCY18 for most
commodities
Exhibit 8: Movement in quarterly price index of commodity
basket (Indexed with 4QCY16)
Source: Company, MOSL
Source: Company, MOSL
Exhibit 9: NEST’s commodity basket price index on a yearly basis
Source: Company, MOSL
Exhibit 10: Favorable market momentum continues
Source: Company, MOSL
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5
 Motilal Oswal Financial Services
Nestle India
Exhibit 11: NEST enjoys a leadership position in 7 out of 9 categories
Source: Company, MOSL
Exhibit 12: Maintains leadership position in ~85% of its product portfolio
Source: Company, MOSL
21 August 2018
6
 Motilal Oswal Financial Services
Nestle India
Exhibit 13: New launches over the years; accelerated in last 20 months
Year
No. of
launches
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
CY12
9
CY13
6
CY14
7
Maggi Oats
Noodles
Nestlé KitKat
Senses Milk
Nestlé KitKat
Senses Dark
Nestlé KitKat
Senses Extra
Smooth
Nestle Masala
Buttermilk
Nestle Lassi
NAN Lo-Lac
CY17
CY18 (YTD)
9 (17 including
4 (7 including
3
variants and re- variants and re-
launches)
launches)
Maggi Nutri-licious
Relaunched Maggi Maggi Hot Heads 4
Kitkat strawberry
Noodles : 2
duo
Noodles
variants
variants
Munch Crunch o'
Maggi No Onion Maggi Masalas of
Nuts
Munch Nuts
No Garlic Masala India : 4 variants
Cerelac Stage 5
Nestle a+ Grekyo
Nesplus:4 variants
Maggi Hot Heads
greek yogurts : 3
Cuppa Noodles
variants
Maggi Cuppa
Masala
Maggi Cuppa
Chilly Chow
Maggi Cup-a-
licious Soups 6
variants
Nestle a+ Grekyo 4
variants
Nestle Everyday
Masala Fusion
Dairy Whitener 6
variants
Nescafe RTD 3
variants
Ceregrow
Nestle a+ Pro-
grow
Renovation of
Cerelac with Iron
Nescafe Sunrise
Insta-filter
Nestea Iced Tea 3
variants
Nescafe Latte
Kitkat Duo
Nestle Munch Trio
Barone Charge
New Alpino
Nan Excella Pro
Nestle Resource
High Protein : 3
variants
Milo Ready-to-
Drink beverage
KITKAT Dessert
Delight
Relaunch of
Milkybar
Milkybar Moosha
Maggi Special
Masala noodles
CY15
CY16
19 (39 including
variants and re-
launches)
Nestle Baby & Me
Cerelac Shishu
Aahar
Renovation of
Lactogen
Renovation of
Cerelac
Maggi Healthy
Soups
Nestle Kitkat Dark
Crisp Wafer
Fingers
Munch Rollz
Wafer Tube
Relaunch of
Nescafe Classic in
a unique jar
Sunrise Strong
NAN PRO 1
Maggi Hungrooo
Maggi Magical
Masala Noodles
Nestle Munch 4*4
Nestle Munch
convenient share
bag pack
Nestle Alpino
Source: Company, MOSL
Exhibit 14: Forayed into the breakfast cereal segment with NesPlus
Source: Company, MOSL
21 August 2018
7
 Motilal Oswal Financial Services
Nestle India
Exhibit 15: Nestle’s segment-wise performance
2008
2009
2010
2011
2012
2013
2014
2015
2016*
2017
Volume (MT)
Milk Products
118,651 134,142 144,397 147,984 140,386 138,772 135,591 131,980 128,751 130,796
Beverages
24,114 23,369 26,458 26,692 25,353 27,717 24,673 22,130 22,092 24,423
Prepared Dishes & Cooking Aids
127,835 155,555 193,494 219,041 236,554 245,443 254,553 103,138 176,871 210,427
Chocolate & Confectionery
40,200 44,116 53,483 52,678 47,745 46,718 41,080 33,083 35,289 36,803
Total
310,800 357,182 417,832 446,395 450,038 458,650 455,897 290,331 363,003 402,449
Volume (as a % of total)
Milk Products (MT)
38%
38%
35%
33%
31%
30%
30%
45%
35%
33%
Beverages (MT)
8%
7%
6%
6%
6%
6%
5%
8%
6%
6%
Prepared Dishes & Cooking Aids (MT)
41%
44%
46%
49%
53%
54%
56%
36%
49%
52%
Chocolate & Confectionery
13%
12%
13%
12%
11%
10%
9%
11%
10%
9%
Total
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Volume Growth (%)
Milk Products
10.1%
13.1%
7.6%
2.5%
-5.1%
-1.1%
-2.3%
-2.7%
-2.4%
1.6%
Beverages
0.0%
-3.1%
13.2%
0.9%
-5.0%
9.3%
-11.0% -10.3%
-0.2%
10.6%
Prepared Dishes & Cooking Aids
30.1%
21.7%
24.4%
13.2%
8.0%
3.8%
3.7%
-59.5%
71.5%
19.0%
Chocolate & Confectionery
12.4%
9.7%
21.2%
-1.5%
-9.4%
-2.2%
-12.1% -19.5%
6.7%
4.3%
Total
16.9%
14.9%
17.0%
6.8%
0.8%
1.9%
-0.6%
-36.3%
25.0%
10.9%
Weighted average volume growth
17.9%
15.3%
17.5%
7.2%
1.3%
2.0%
-0.3%
-25.3%
34.6%
11.5%
Price (INR/Kg)
Milk Products
163
172
192
226
275
293
337
354
360
368
Beverages
332
344
340
400
443
478
543
604
582
568
Prepared Dishes & Cooking Aids
82
86
89
98
103
110
116
127
131
129
Chocolate & Confectionery
169
175
182
209
245
275
305
336
332
332
Total
144
146
153
172
191
205
222
290
259
252
Price Growth (%)
Milk Products
11.7%
5.4%
11.6%
17.8%
21.4%
6.7%
15.0%
4.9%
1.8%
2.4%
Beverages
10.9%
3.6%
-1.2%
17.8%
10.6%
7.9%
13.7%
11.2%
-3.6%
-2.4%
Prepared Dishes & Cooking Aids
3.5%
4.3%
3.9%
10.3%
4.4%
7.0%
5.8%
9.5%
2.8%
-1.8%
Chocolate & Confectionery
6.3%
3.5%
4.3%
14.4%
17.3%
12.4%
10.8%
10.1%
-1.2%
0.0%
Total
4.9%
1.6%
4.4%
12.6%
10.9%
7.2%
8.6%
30.7%
-10.7%
-2.8%
Weighted average price growth
8.8%
4.6%
6.6%
15.2%
14.6%
7.7%
11.6%
7.3%
0.9%
0.3%
Gross Sales (INR m)
Milk Products
19,388 23,113 27,763 33,510 38,594 40,712 45,752 46,694 46,350 48,196
Beverages
8,009
8,042
8,994
10,684 11,227 13,241 13,398 13,360 12,861 13,870
Prepared Dishes & Cooking Aids
10,519 13,350 17,250 21,545 24,302 26,982 29,613 13,141 23,176 27,071
Chocolate & Confectionery
6,795
7,719
9,759
10,997 11,696 12,864 12,532 11,109 11,709 12,214
Total
44,711 52,224 63,766 76,736 85,819 93,799 101,295 84,304 94,096 101,351
Gross Sales (as a % of total)
Milk Products
43%
44%
44%
44%
45%
43%
45%
55%
49%
48%
Beverages
18%
15%
14%
14%
13%
14%
13%
16%
14%
14%
Prepared Dishes & Cooking Aids
24%
26%
27%
28%
28%
29%
29%
16%
25%
27%
Chocolate & Confectionery
15%
15%
15%
14%
14%
14%
12%
13%
12%
12%
Total
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Gross Sales Growth (%)
Milk Products
23.0%
19.2%
20.1%
20.7%
15.2%
5.5%
12.4%
2.1%
-0.7%
4.0%
Beverages
10.9%
0.4%
11.8%
18.8%
5.1%
17.9%
1.2%
-0.3%
-3.7%
7.8%
Prepared Dishes & Cooking Aids
34.7%
26.9%
29.2%
24.9%
12.8%
11.0%
9.7%
-55.6%
76.4%
16.8%
Chocolate & Confectionery
19.5%
13.6%
26.4%
12.7%
6.4%
10.0%
-2.6%
-11.4%
5.4%
4.3%
Total
22.6%
16.8%
22.1%
20.3%
11.8%
9.3%
8.0%
-16.8%
11.6%
7.7%
* Slight impact of implementation of Goods and Services Tax (GST) on the CY16 financial statements
Source: Company, MOSL
21 August 2018
8
 Motilal Oswal Financial Services
Nestle India
Story in chart
Exhibit 16: Sales grew 7.7% in CY17 led by volumes
22.6
Price growth (%)
22.1 20.3
11.8
Gross sales growth (%)
11.6
Exhibit 17: EBITDA margin remained flat YoY in CY17
Gross Margin (%)
54.7 54.7
51.5
52.5
51.3
52.2
22.3 22.2
21.0
21.3
20.1
EBITDA Margin (%)
57.6 57.5
54.1
22.2 22.2
16.8
56.8
9.3
8.0
7.7
(16.8)
CY08 CY09 CY10 CY11 CY12 CY13 CY14 CY15 CY16 CY17
Source: Company, MOSL
20.2 20.5 20.2
CY08 CY09 CY10 CY11 CY12 CY13 CY14 CY15 CY16 CY17
Source: Company, MOSL
Exhibit 18: Segmental volume contribution
Milk Products/ Nutrition
Prepared Dishes
Beverages
Chocolate & Conf.
9.0
11.4
9.7
9.1
Exhibit 19: Segmental sales contribution
Milk Products/ Nutrition
Prepared Dishes
Beverages
Chocolate & Conf.
12.9 12.4 12.8 11.8 10.6 10.2
41.1 43.6 46.3 49.1 52.6 53.5 55.8 35.5 48.7 52.3
7.6
7.8 6.5 6.3
6.1 6.1
6.0 5.6 6.0 5.4
38.2 37.6 34.6 33.2 31.2 30.3 29.7 45.5 35.5 32.5
CY08 CY09 CY10 CY11 CY12 CY13 CY14 CY15 CY16 CY17
Source: Company, MOSL
15.2 14.8 15.3 14.3 13.6 13.7 12.4 13.2 12.4 12.1
15.6 24.6 26.7
23.5 25.6 27.1 28.1 28.3 28.8 29.2
15.8
13.7 13.7
17.9 15.4 14.1 13.9 13.1 14.1 13.2
43.4 44.3 43.5 43.7 45.0 43.4 45.2
55.4 49.3 47.6
CY08 CY09 CY10 CY11 CY12 CY13 CY14 CY15 CY16 CY17
Source: Company, MOSL
Exhibit 20: Milk Products grew 4% in CY17
Volume Growth (%)
Sales Growth (%)
23.0
19.2 20.1 20.7
Price Growth (%)
Exhibit 21: Prepared Dishes grew 16.8% in CY17 on a high
base of 76.4% in CY16
Volume Growth (%)
Sales Growth (%)
Price Growth (%)
76.4
15.2
5.5
12.4
2.1
(0.7)
4.0
34.7
26.9
29.2
24.9
12.8 11.0
9.7
16.8
(55.6)
CY08 CY09 CY10 CY11 CY12 CY13 CY14 CY15 CY16 CY17
Source: Company, MOSL
CY08 CY09 CY10 CY11 CY12 CY13 CY14 CY15 CY16 CY17
Source: Company, MOSL
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 Motilal Oswal Financial Services
Nestle India
Exhibit 22: Beverages grew 7.8% in CY17 on a low base
Volume Growth (%)
Price Growth (%)
Sales Growth (%)
Exhibit 23: Chocolates grew 4.3% in CY17
Volume Growth (%)
Price Growth (%)
Sales Growth (%)
26.4
18.8
10.9
0.4
11.8
5.1
1.2
(0.3)
17.9
7.8
(3.7)
19.5
13.6
12.7
6.4
10.0
(2.6)
(11.4)
CY08 CY09 CY10 CY11 CY12 CY13 CY14 CY15 CY16 CY17
Source: Company, MOSL
5.4
4.3
CY08 CY09 CY10 CY11 CY12 CY13 CY14 CY15 CY16 CY17
Source: Company, MOSL
Exhibit 24: Nestle India P/E (x)
71.0
57.0
43.0
29.0
15.0
40.4
31.5
20.7
P/E (x)
Min (x)
Avg (x)
+1SD
49.2
Max (x)
-1SD
58.5
Exhibit 25: Consumer P/E (x)
45.0
37.0
29.0
21.0
13.0
17.1
P/E (x)
Min (x)
Avg (x)
+1SD
38.5
31.4
24.4
Max (x)
-1SD
43.5
43.5
52.2
Source: Company, MOSL
Source: Company, MOSL
21 August 2018
10
 Motilal Oswal Financial Services
Nestle India
Financials and valuations
Income Statement
Y/E December
Net Sales
Change (%)
Gross Profit
Margin (%)
Total Expenditure
EBITDA
Change (%)
Margin (%)
Depreciation
Int. and Fin. Ch.
Other Inc.- Rec.
PBT
Change (%)
Margin (%)
Tax
Tax Rate (%)
Adjusted PAT
Change (%)
Margin (%)
Non-rec. (Exp)/Inc.
Reported PAT
Balance Sheet
Y/E December
Share Capital
Reserves
Net Worth
Loans
Capital Employed
Gross Block
Less: Accum. Depn.
Net Fixed Assets
Capital WIP
Investments
Current
Non-current
Curr. Assets, L&A
Inventory
Account Receivables
Cash and Bank Balance
Others
Curr. Liab. and Prov.
Account Payables
Other Liabilities
Provisions
Net Curr. Assets
Def. Tax Liability
Appl. of Funds
E: MOSL Estimates
2015
81,753
-17.0
47,064
57.6
65,287
16,466
-21.6
20.1
3,473
33
1,101
14,062
-23.4
17.2
2,504
17.8
11,558
-7.3
14.1
5,925
5,633
2016
91,413
11.8
52,585
57.5
71,112
20,301
23.3
22.2
3,537
909
1,509
17,365
23.5
19.0
5,440
31.3
11,924
3.2
13.0
1,911
10,014
2017
100,096
9.5
56,827
56.8
77,882
22,214
9.4
22.2
3,423
919
1,769
19,641
13.1
19.6
6,141
31.3
13,500
13.2
13.5
1,248
12,252
2018
111,960
11.9
66,254
59.2
84,139
27,821
25.2
24.8
3,110
1,103
2,434
26,042
32.6
23.3
8,594
33.0
17,448
29.2
15.6
1,248
16,200
2019E
126,533
13.0
73,735
58.3
96,415
30,118
8.3
23.8
3,299
1,213
2,862
28,468
9.3
22.5
9,394
33.0
19,073
9.3
15.1
1,248
17,825
(INR Million)
2020E
143,652
13.5
83,258
58.0
109,852
33,800
12.2
23.5
3,520
1,334
3,151
32,096
12.7
22.3
10,592
33.0
21,504
12.7
15.0
1,248
20,256
(INR Million)
2020E
964
34,299
35,263
351
35,614
40,457
17,351
23,106
942
24,401
18,549
5,853
43,736
13,450
1,174
25,851
3,261
55,351
13,402
5,715
36,233
-11,614
-1,220
35,615
2015
964
27,214
28,178
177
28,356
51,174
22,195
28,979
2,308
13,249
9,831
3,418
16,269
8,208
784
4,996
2,281
30,720
7,435
4,659
18,625
-14,451
-1,729
28,356
2016
964
31,859
32,823
332
33,155
30,951
3,650
27,301
1,882
17,557
12,814
4,743
21,365
9,401
979
8,800
2,185
33,396
7,992
5,145
20,260
-12,032
-1,553
33,155
2017
964
33,242
34,206
351
34,557
33,584
7,423
26,162
942
19,789
13,936
5,853
26,734
9,025
890
14,574
2,245
37,849
9,846
4,212
23,791
-11,115
-1,220
34,558
2018
964
36,714
37,678
351
38,029
35,531
10,533
24,999
942
21,182
15,329
5,853
34,276
10,810
915
20,044
2,507
42,149
10,143
4,454
27,553
-7,873
-1,220
38,029
2019E
964
37,183
38,148
351
38,499
37,770
13,831
23,939
942
22,715
16,862
5,853
40,541
11,524
1,034
25,130
2,853
48,419
11,717
5,034
31,669
-7,878
-1,220
38,499
21 August 2018
11
 Motilal Oswal Financial Services
Nestle India
Financials and valuations
Ratios
Y/E December
Basic (INR)
EPS
Cash EPS
BV/Share
DPS
Payout (%)
Valuation (x)
P/E
Cash P/E
EV/Sales
EV/EBITDA
P/BV
Dividend Yield (%)
Return Ratios (%)
RoE
RoCE
Working Capital Ratios
Debtor (Days)
Asset Turnover (x)
Leverage Ratio
Debt/Equity (x)
Cash Flow Statement
Y/E December
OP/(loss) before Tax
Int./Div. Received
Depn. and Amort.
Interest Paid
Direct Taxes Paid
Incr in WC
CF from Operations
Incr in FA
Free Cash Flow
Pur of Investments
CF from Invest.
Issue of Shares
Incr in Debt
Dividend Paid
Others
CF from Fin. Activity
Incr/Decr of Cash
Add: Opening Balance
Closing Balance
E: MOSL Estimates
2015
119.9
155.9
292.2
48.5
40.5
90.8
69.8
12.6
62.7
37.3
0.4
40.9
40.7
3.4
2.7
0.0
2016
123.7
160.4
340.4
63.0
50.9
88.0
67.9
11.2
50.4
32.0
0.6
39.1
40.8
3.8
2.8
0.0
2017
140.0
175.5
354.8
86.0
61.4
77.8
62.0
10.1
45.7
30.7
0.8
40.3
41.7
3.2
2.8
0.0
2018
181.0
213.2
390.8
110.0
60.8
60.2
51.1
9.0
36.3
27.9
1.0
48.5
50.1
3.0
3.0
0.0
2019E
197.8
232.0
395.6
150.0
75.8
55.0
46.9
7.9
33.3
27.5
1.4
50.3
52.0
3.0
3.2
0.0
2020E
223.0
259.5
365.7
200.0
89.7
48.8
42.0
7.0
29.6
29.8
1.8
58.6
60.4
3.0
3.8
0.0
(INR Million)
2020E
30,280
3,151
3,520
1,334
10,592
4,458
25,849
2,687
23,162
1,686
-4,373
0
0
23,141
2,386
-20,755
721
25,130
25,851
2015
12,994
1,101
3,872
33
2,899
3,451
16,349
944
15,405
5,131
-6,075
0
-18
5,633
-4,086
-9,737
537
4,458
4,995
2016
16,765
1,509
-18,545
909
5,612
1,385
-6,607
-20,649
14,042
4,307
16,341
0
154
7,222
1,139
-5,929
3,805
4,996
8,801
2017
18,791
1,769
3,773
919
6,492
4,858
20,080
1,693
18,387
2,232
-3,925
0
20
9,980
-421
-10,381
5,774
8,800
14,574
2018
24,711
2,434
3,110
1,103
8,594
2,228
20,125
1,947
18,178
1,394
-3,341
0
0
12,727
1,413
-11,314
5,470
14,574
20,044
2019E
26,819
2,862
3,299
1,213
9,394
5,090
24,164
2,239
21,925
1,533
-3,772
0
0
17,356
2,049
-15,307
5,086
20,044
25,130
21 August 2018
12
 Motilal Oswal Financial Services
Nestle India
NOTES
21 August 2018
13
 Motilal Oswal Financial Services
Explanation of Investment Rating
Investment Rating
BUY
SELL
NEUTRAL
UNDER REVIEW
NOT RATED
Expected return (over 12-month)
>=15%
< - 10%
> - 10 % to 15%
Rating may undergo a change
We have forward looking estimates for the stock but we refrain from assigning recommendation
Nestle India
*In case the recommendation given by the Research Analyst becomes inconsistent with the investment rating legend, the Research Analyst shall within 28 days of the inconsistency, take appropriate measures to make the recommendation consistent with the investment rating legend.
Disclosures:
The following Disclosures are being made in compliance with the SEBI Research Analyst Regulations 2014 (herein after referred to as the Regulations).
Motilal Oswal Securities Ltd. (MOSL) is a SEBI Registered Research Analyst having registration no. INH000000412. MOSL, the Research Entity (RE) as defined in the Regulations, is engaged in the business of providing Stock broking services,
Investment Advisory Services, Depository participant services & distribution of various financial products. MOSL is a subsidiary company of Motilal Oswal Financial Service Ltd. (MOFSL). MOFSL is a listed public company, the details in respect of
which are available on
www.motilaloswal.com.
MOSL is registered with the Securities & Exchange Board of India (SEBI) and is a registered Trading Member with National Stock Exchange of India Ltd. (NSE) and Bombay Stock Exchange Limited
(BSE), Metropolitan Stock Exchange Of India Ltd. (MSE) for its stock broking activities & is Depository participant with Central Depository Services Limited (CDSL) & National Securities Depository Limited (NSDL) and is member of Association of
Mutual Funds of India (AMFI) for distribution of financial products. Details of associate entities of Motilal Oswal Securities Limited are available on the website at
http://onlinereports.motilaloswal.com/Dormant/documents/Associate%20Details.pdf
MOSL, it’s associates, Research Analyst or their relative may have any financial interest in the subject company. MOSL and/or its associates and/or Research Analyst may have actual/beneficial ownership of 1% or more securities in the subject
company at the end of the month immediately preceding the date of publication of the Research Report.
MOSL and its associate company(ies), their directors and Research Analyst and their relatives may; (a) from time to time, have a long or short
position in, act as principal in, and buy or sell the securities or derivatives thereof of companies mentioned herein. (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in
the financial instruments of the company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies) or may have any other potential conflict of interests with respect to any recommendation and other related information and
opinions.; however the same shall have no bearing whatsoever on the specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOSL even though
there might exist an inherent conflict of interest in some of the stocks mentioned in the research report.
Research Analyst may have served as director/officer, etc. in the subject company in the last 12 month period. MOSL and/or its associates may
have received any compensation from the subject company in the past 12 months.
In the last 12 months period ending on the last day of the month immediately preceding the date of publication of this research report, MOSL or any of its associates may have:
a)
managed or co-managed public offering of securities from subject company of this research report,
b)
received compensation for investment banking or merchant banking or brokerage services from subject company of this research report,
c)
received compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company of this research report.
d)
Subject Company may have been a client of MOSL or its associates during twelve months preceding the date of distribution of the research report.
MOSL and it’s associates have not received any compensation or other benefits from the subject company or third party in connection with the research report. To enhance transparency, MOSL has incorporated a Disclosure of Interest Statement in
this document. This should, however, not be treated as endorsement of the views expressed in the report. MOSL and / or its affiliates do and seek to do business including investment banking with companies covered in its research reports. As a result,
the recipients of this report should be aware that MOSL may have a potential conflict of interest that may affect the objectivity of this report. Compensation of Research Analysts is not based on any specific merchant banking, investment banking or
brokerage service transactions.
Terms & Conditions:
This report has been prepared by MOSL and is meant for sole use by the recipient and not for circulation. The report and information contained herein is strictly confidential and may not be altered in any way, transmitted to, copied or distributed, in part
or in whole, to any other person or to the media or reproduced in any form, without prior written consent of MOSL. The report is based on the facts, figures and information that are considered true, correct, reliable and accurate. The intent of this report
is not recommendatory in nature. The information is obtained from publicly available media or other sources believed to be reliable. Such information has not been independently verified and no guaranty, representation of warranty, express or implied,
is made as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice. The report is prepared solely for informational purpose and does not constitute an offer document or solicitation of offer to
buy or sell or subscribe for securities or other financial instruments for the clients. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. MOSL will not treat recipients as customers by
virtue of their receiving this report.
Analyst Certification
The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the research analyst(s) was, is, or will be directly or indirectly related to the
specific recommendations and views expressed by research analyst(s) in this report.
Disclosure of Interest Statement
Analyst ownership of the stock
Nestle India
No
A graph of daily closing prices of securities is available at
www.nseindia.com, www.bseindia.com.
Research Analyst views on Subject Company may vary based on Fundamental research and Technical Research. Proprietary trading desk of MOSL or
its associates maintains arm’s length distance with Research Team as all the activities are segregated from MOSL research activity and therefore it can have an independent view with regards to subject company for which Research Team have
expressed their views.
Regional Disclosures (outside India)
This report is not directed or intended for distribution to or use by any person or entity resident in a state, country or any jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject
MOSL & its group companies to registration or licensing requirements within such jurisdictions.
For Hong Kong:
This report is distributed in Hong Kong by Motilal Oswal capital Markets (Hong Kong) Private Limited, a licensed corporation (CE AYY-301) licensed and regulated by the Hong Kong Securities and Futures Commission (SFC) pursuant to the Securities
and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) “SFO”. As per SEBI (Research Analyst Regulations) 2014 Motilal Oswal Securities (SEBI Reg No. INH000000412) has an agreement with Motilal Oswal capital Markets (Hong Kong)
Private Limited for distribution of research report in Hong Kong. This report is intended for distribution only to “Professional Investors” as defined in Part I of Schedule 1 to SFO. Any investment or investment activity to which this document relates is only
available to professional investor and will be engaged only with professional investors.” Nothing here is an offer or solicitation of these securities, products and services in any jurisdiction where their offer or sale is not qualified or exempt from
registration. The Indian Analyst(s) who compile this report is/are not located in Hong Kong & are not conducting Research Analysis in Hong Kong.
For U.S.
Motilal Oswal Securities Limited (MOSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under applicable state laws in the United States. In addition MOSL is not a registered
investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act" and together with the 1934 Act, the "Acts), and under applicable state laws in the United States. Accordingly, in the absence of specific exemption
under the Acts, any brokerage and investment services provided by MOSL, including the products and services described herein are not available to or intended for U.S. persons. This report is intended for distribution only to "Major Institutional
Investors" as defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as "major institutional investors"). This document must not be acted on or relied on by persons who are not major institutional
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15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act") and interpretations thereof by the U.S. Securities and Exchange Commission ("SEC") in order to conduct business with Institutional Investors based in the U.S.,
MOSL has entered into a chaperoning agreement with a U.S. registered broker-dealer, Motilal Oswal Securities International Private Limited. ("MOSIPL"). Any business interaction pursuant to this report will have to be executed within the provisions of
this chaperoning agreement.
The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S. registered broker-dealer, MOSIPL, and therefore, may not be subject
to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public appearances and trading securities held by a research analyst account.
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In Singapore, this report is being distributed by Motilal Oswal Capital Markets Singapore Pte Ltd (“MOCMSPL”) (Co.Reg. NO. 201129401Z) which is a holder of a capital markets services license and an exempt financial adviser in Singapore,
as per the approved agreement under Paragraph 9 of Third Schedule of Securities and Futures Act (CAP 289) and Paragraph 11 of First Schedule of Financial Advisors Act (CAP 110) provided to MOCMSPL by Monetary Authority of Singapore.
Persons in Singapore should contact MOCMSPL in respect of any matter arising from, or in connection with this report/publication/communication. This report is distributed solely to persons who qualify as “Institutional Investors”, of which some of
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The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced
in any form, without prior written consent. This report and information herein is solely for informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial
instruments. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and opinions expressed in
this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of
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completeness or fairness of the information and opinions contained in this document. The Disclosures of Interest Statement incorporated in this document is provided solely to enhance the transparency and should not be treated as endorsement of the
views expressed in the report. This information is subject to change without any prior notice. The Company reserves the right to make modifications and alternations to this statement as may be required from time to time without any prior approval.
MOSL, its associates, their directors and the employees may from time to time, effect or have effected an own account transaction in, or deal as principal or agent in or for the securities mentioned in this document. They may perform or seek to perform
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into account before interpreting the document. This report has been prepared on the basis of information that is already available in publicly accessible media or developed through analysis of MOSL. The views expressed are those of the analyst, and
the Company may or may not subscribe to all the views expressed therein. This document is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or
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distribution, publication, availability or use would be contrary to law, regulation or which would subject MOSL to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all
jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction. Neither the Firm, not its directors, employees, agents or representatives shall
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The person accessing this information specifically agrees
to exempt MOSL or any of its affiliates or employees from, any and all responsibility/liability arising from such misuse and agrees not to hold MOSL or any of its affiliates or employees responsible for any such misuse and further agrees to hold MOSL
or any of its affiliates or employees free and harmless from all losses, costs, damages, expenses that may be suffered by the person accessing this information due to any errors and delays.
Registered Office Address: Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai-400025; Tel No.: 022-3980 4263; www.motilaloswal.com. Correspondence Address: Palm Spring Centre, 2nd Floor, Palm
Court Complex, New Link Road, Malad (West), Mumbai- 400 064. Tel No: 022 3080 1000. Compliance Officer: Neeraj Agarwal, Email Id:
na@motilaloswal.com,
Contact No.:022-38281085.
Registration details of group entities.: MOSL: SEBI Registration: INZ000158836 (BSE/NSE/MCX/NCDEX); CDSL: IN-DP-16-2015; NSDL: IN-DP-NSDL-152-2000; Research Analyst: INH000000412. AMFI: ARN 17397. Investment Adviser:
INA000007100.IRDA Corporate Agent-CA0541. Motilal Oswal Asset Management Company Ltd. (MOAMC): PMS (Registration No.: INP000000670) offers PMS and Mutual Funds products. Motilal Oswal Wealth Management Ltd. (MOWML): PMS
(Registration No.: INP000004409) offers wealth management solutions. *Motilal Oswal Securities Ltd. is a distributor of Mutual Funds, PMS, Fixed Deposit, Bond, NCDs, Insurance and IPO products. * Motilal Oswal Commodities Broker Pvt. Ltd. offers
Commodities Products. * Motilal Oswal Real Estate Investment Advisors II Pvt. Ltd. offers Real Estate products. * Motilal Oswal Private Equity Investment Advisors Pvt. Ltd. offers Private Equity products
21 August 2018
14