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BROKING | DEPOSITORY | DISTRIBUTION | FINANCIAL ADVISORY|MERCHANT BANKING

NESTLE INDIA LTD

Stock Coverage

Date 17th Aug 2018

BSE Code 500790

NSE Code NESTLEIND

Market Cap (Rs Cr) 104855.47

52 week High/Low 11000/6585

Industry Consumer Food

Face Value Rs 10/Share

Shares O/S (In No) 9.64 Cr

EPS * 152.89

Book Value* 385.32

P/E 71.13

P/B 28.22

*Note: On TTM basis

Shareholding Pattern as on June’ 2018

Research Analyst : Astha Jain

Nestl' India, one the biggest players in FMCG segment, has a presence in milk & nutrition, beverages, prepared dishes & cooking aids & chocolate & confectionery segments. Nestl' India manufactures products under internationally famous brand names such as NESCAF', MAGGI, MILKYBAR, KIT KAT, BAR-ONE, MILKMAID and NESTEA and in recent years the Company has also introduced products of daily consumption and use such as NESTL' Milk, NESTL' SLIM Milk, NESTL' Dahi and NESTL' Jeera Raita. Nestle has created brands like Nestl' Milkmaid, Nestl' Everyday, Maggi Noodles, Maggi Soups, Polo, Kit Kat, Nescafe & many more.

Strong financial Performance: Company’s bottomline has jumped by almost 50% in Q2CY18 at Rs 395 Cr as against Rs 263 Cr in Q2CY17.Co’s operating profit has shown rise of almost 40% at 645 Cr in Q2CY18 as against Rs 462 Cr inQ2CY17. Co’s operating profit & net profit margin has shown surge of more than 25% in Q2CY18 thus reflecting sound financial health. Co’s brand Kitkat , Nescafe & Maggi has shown strong growth . Company has introduced a special limited edition range of noodle variants inspired by regional cuisines and spices called “MAGGI Masalas of India” in markets across India. It was launched innovatively through Google Search and PayTM. It was the first time that any brand introduced Google ‘Search’ in the pre-launch phase.

New Product Launch: Company has launched NESPLUS - a range of nutritious and delicious breakfast cereals for the entire family. Company has added Nestlé Breakfast Cereals from Cereal Partners Worldwide (CPW) to its existing portfolio this year. The new range of NESPLUS breakfast cereals comes with four multigrain variants – Kokos, Choco- Burst Fillows, Strawberry-Burst Fillows and Nutty Honey Granola. Each of these is a combination of four grains - wheat, rice, oats and the traditional Indian millet, jowar. This combination of grains along with unique flavors has been specially created for the Indian palate. With this launch, Nestlé India aims to provide high quality nutritious breakfast options for the Indian consumers in line with its vision to introduce products ingrained in nutrition, wellness and health.

Valuation

The company is currently trading at 71.13 of TTM eps of Rs 152.89 while it is trading at 67x of FY19E eps & 61x of FY20E eps. In H1CY18, company has seen strong growth in its financials .With launch of NESPLUS - a range of nutritious and delicious breakfast cereals for the entire family & Canned beverages - Nescafe RTD , we expect company to acquire strong market share going forward ,Hence looking after strong future prospects of company ,we are recommending “Buy” on the stock with price target of Rs 11960 for long term horizon.

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For Private Circulation Only HEM RESEARCH

BUY CMP 10875.35 TARGET 11960 LONG TERM INVESTMENT

NESTLE INDIA LTD



NESTLÉ India is a subsidiary of NESTLÉ S.A. of Switzerland. With eight factories, 4 branch offices and a large number of co-packers, Nestlé is the world’s largest food and beverage company. NESTLÉ India set up its first manufacturing facility at Moga (Punjab) in 1961 followed by its manufacturing facilities at Choladi (Tamil Nadu), in 1967; Nanjangud (Karnataka), in 1989; Samalkha (Haryana), in 1992; Ponda and Bicholim (Goa), in 1995 and 1997, respectively; and Pantnagar (Uttarakhand), in 2006. In 2012, Nestlé India set up its 8th manufacturing facility at Tahliwal (Himachal Pradesh). The 4 Branch Offices located at Delhi, Mumbai, Chennai and Kolkata help facilitate the sales and marketing activities. The NESTLÉ India’s Head Office is located in Gurgaon, Haryana. Co have more than 2000 brands ranging from global icons to local favourites, and co is present in 191 countries around the world. Co exports to Caribbean Islands, European Union and Sri Lanka. Important export markets of co for instant coffee were Turkey, Bangladesh, Taiwan, Singapore and Middle East.

Business Segments

Milk Product Segment: This segment includes products like NAN EXCELLA PRO for babies who cannot be breastfed .In 2016, company launched, CEREGROW, an iron fortified nutritious cereal for children over 2 years . This segment also includes brands like Nestlé Milkmaid , a sweetened condensed milk , which was the first brand to be traded by Nestlé in India and turned a 100 years old in 2012.It is available in 400g tins across the country over 100,000 stores In this segment, during CY17, company extended its chilled dairy portfolio range of Greek yogurts under NESTLÉ a+ GREKYO with exotic fruit flavors like blueberry, litchi and plain greek style curd. Prepared Dishes & cooking Aids: It includes brands like Maggi Noodles, Maggi Sauces , Maggi Soups ,Maggi Oats Noodles, Maggi Atta Noodles, Maggi Pazzta, Maggi Coconut Milk Powder, Maggi magic Cubes etc. Powdered & Liquid beverages: This segment include brands like Nescafe,Nescafe Sunrise,Nestea, Nescafe Cappuccino, Nescafe Gold In 2017, company introduced MILO ready-to-drink beverage low on sugar which received strong response. Confectionary : This segment include brands like KITKAT, MUNCH, MILKYBAR, BARONE, NESTLÉ CLASSIC and ALPINO. In this segment in CY’17, co launched KITKAT Dessert Delight which was in a distinct ‘finger-tablet’ format exclusively for the Indian market, with two rich and indulgent flavours, inspired by international desserts. Co’s MILKYBAR’s core portfolio in this segment became robust with MILKYBAR relaunch .MILKYBAR extended its brand franchise to MILKYBAR MOOSHA, with a new milk coated bar with caramel and nougat.

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NESTLE INDIA LTD



Healthy Financial Performance in H1CY18 Co has registered whopping 43% growth in its bottonline at Rs 819 Cr in H1’CY18 against Rs 570 Cr in H1’CY17 with operating profit of company has registered growth of 37% at Rs 1342 Cr & topline has registered growth of 7% at Rs 5455.64 Cr in H1’CY18. Co has shown double digit growth in its operating as well as net profit margin level .During H1CY’18 co’s OPM stood at 24.60% as compare to 19.29% in H1’CY17 while net profit margin of company stood at 15.01% as against 11.23% in H1CY17.

For Private Circulation only HEM RESEARCH

NESTLE INDIA LTD



New Product Launches Co introduced fortified Nestlé a+ Milk during CY17. This is a step taken by company to address issues of iron and vitamin D deficiency\ prevalent in India. Co’s thrust on innovation and renovation continued with the launch of MILO, new variants of GREKYO, MAGGI Nutri-licious Noodles, MILKYBAR and KITKAT Dessert Delight. Co also focused on creative ways to engage its consumers. MAGGI Masalas of India engagement with Google was the first-of-its kind in the country where Google allowed to use the search engine as a platform for voting on which flavours of Masalas of India would consumers like and want. In line with the vision to introduce products rooted in nutrition, health and wellness. co announced the launch of NESPLUS - a range of nutritious and delicious breakfast cereals for the entire family. Company has added Nestlé Breakfast Cereals from Cereal Partners Worldwide (CPW) to its existing portfolio this year. CPW is a 50/50 joint venture which combines the expertise of Nestlé S.A, Switzerland and General Mills Inc., United States, to produce and sell breakfast cereals.A unique combination of wholegrain and multigrain, NESPLUSbreakfast cereals aim to offer an array of healthy breakfast choices for Indian families.The new range of NESPLUS breakfast cereals comes with four multigrain variants – Kokos, Choco- Burst Fillows, Strawberry-Burst Fillows and Nutty Honey Granola. Each of these is a combination of four grains - wheat, rice, oats and the traditional Indian millet, jowar. This combination of grains along with unique flavors has been specially created for the Indian palate. A key characteristic of the product is that it remains crunchy in warm milk. With this launch, co aims to provide high quality nutritious breakfast options for the Indian consumers in line with its vision to introduce products ingrained in nutrition, wellness and health.




NESTLE INDIA LTD

P&L A/c

Rs Cr

Particulars CY15 CY16 CY17 CY18E CY19E

Net Sales 8175.31 9141.34 10009.60 11010.56 12111.62 Growth ( %) -- 11.82 9.50 10.00 10.00 Expenditure 6592.16 7291.50 7913.07 8377.94 9215.73 EBIDTA 1583.15 1849.84 2096.53 2632.62 2895.89 Growth (%) -- 16.85 13.34 25.57 10.00 EBIDTA Margin (%)

19.37 20.24 20.95 23.91 23.91

Other Income 110.09 150.90 176.92 194.61 214.07 Depreciation 375.48 353.67 342.25 379.91 417.90 EBIT 1317.80 1647.07 1931.20 2447.32 2692.06 EBIT Margin (%) 16.12 18.02 19.29 22.23 22.23 Interest 3.29 90.91 91.90 91.90 91.90 Exceptional Item (500.84) (10.78) 0.00 0.00 0.00 PBT 813.63 1545.38 1839.30 2355.42 2600.16 Tax 250.36 544.02 614.11 786.48 868.19 PAT 563.27 1001.36 1225.19 1568.94 1731.97 Min Int & Ass Sh 0.00 0.00 0.00 0.00 0.00 Consolidated PAT 563.27 1001.36 1225.19 1568.94 1731.97 Growth (%) -- 77.78 22.35 28.06 10.39 NPM (%) 6.89 10.95 12.24 14.25 14.30

Ratios


EPS 58.42 103.85 127.07 162.72 179.63

ROCE(%) 46.47 49.68 55.88 58.33 52.80

ROE(%) 19.99 30.51 35.82 37.71 34.20

Book Value 292.25 340.42 354.76 431.50 525.15

Debt/Equity 0.01 0.01 0.01 0.01 0.01



NESTLE INDIA LTD

Balance Sheet

Rs Cr


Sh Capital 96.42 96.42 96.42 96.42 96.42

Res & Surplus 2721.42 3185.91 3324.17 4064.12 4967.08

Sh App/Warrants 0.00 0.00 0.00 0.00 0.00

Minority Interest 0.00 0.00 0.00 0.00 0.00

Total Debt(Long Term+Short Term Borrowings)

17.73 33.15 35.14 35.14 35.14

Other Long Term Liab & Provison

1597.17 1972.89 2292.19 2390.19 2475.38

Net Deferred Tax Liability

172.93 155.34 121.96 121.96 121.96

Sources Of Fund 4605.67 5443.71 5869.88 6707.83 7695.98

Net Fixed Assets 3128.64 2918.31 2710.34 3089.71 3189.74

Non –Current Investments

341.78 474.31 585.28 663.99 851.79

Intangible Assets 0.00 0.00 0.00 0.00 0.00

Other Non –Current Assets

130.43 135.04 129.58 158.08 177.52

Total Current Assets 2485.48 3282.80 3937.39 4503.29 5491.48

Current Liabilities & Provisions

1480.66 1366.75 1492.71 1707.25 2014.55

Net Current Assets 1004.82 1916.05 2444.68 2796.04 3476.93

Uses Of Funds 4605.67 5443.71 5869.88 6707.82 7695.98




NESTLE INDIA LTD

Quarterly Financial Highlights

Rs Cr

Particulars Q2CY18 Q2CY17 Q1CY18 YoY% QoQ%

Total Income 2698.40 2484.73 2757.24 8.60 (2.13)

Total Expenses 2053.36 2023.06 2060.39 1.50 (0.34)

Operating Profit 645.04 461.67 696.85 39.72 (7.43)

Net Profit 395.03 263.43 424.03 49.96 (6.84)

PBIDTM % 23.90 18.58 25.27 28.66 (5.42)

NPM % 14.64 10.60 15.38 38.08 (4.81)

EPS 40.97 27.32 43.98 49.96 (6.84)

Past Price Movement



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