Nestlé India still waiting for volume growth to rebound
Moneylife Digital Team 14 May 2013
While the long-term picture for Nestle India is still intact, near-term growth concerns will weigh the company’s stock down, says Nomura Equity Research
 
Nestlé India's revenues and adjusted net profit growth of less than 10% during the March quarter continue to be underwhelming feels Nomura Equity Research. More important is the fact that volume growth trajectory continues to lag in low single digits, which remains a cause for concern for the company and the shareholders alike, the brokerage said.
 
Nomura said, “We believe these results show that a turnaround in volume growth trajectory is still some way off, which should hold back stock price performance from current levels”.
 
Nomura has also pointed out the favourable aspect in the company’s performance. Exports are up 51%, which have pushed the consolidated net sales up.  However, domestic business reported growth of just 7.7% (primarily lead by price increases), which was 2% below Nomura’s estimates.  Domestic sales were on the lower base of last year where growth was just 13.7%. 
 
The company’s performance is given in the table below:
 
 
“We continue to maintain a Neutral stance and believe that while the long-term picture is still intact, near-term growth concerns will weigh the stock down. The market price of the company's share is likely to fall up to about Rs4,516. Investors are advised to await the volume growth rebound,” Nomura concluded.
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