Nestle's Q4 revenues may rise up to 17% YoY, agri-inflation to dent margins

Nestle India Q4 preview: In the October-December quarter, shares of Nestle rose 2.4 per cent, while peers like Hindustan Unilever dropped 5 per cent, and Britannia gained 12 per cent

FMCG major Nestle India is likely to register up to 17.5 per cent year-on-year (YoY) revenue growth to Rs 4,394 crore in the fourth quarter of CY22 (Q4CY22), expect analysts. In the year-ago period, the coffee and tea manufacturing company's revenues stood at Rs 3,706 crore. The company is scheduled to announce results on Thursday, February 16.
 

According to brokerages' estimates, higher agri-inflation and gross margin compression are likely to contract Ebitda (earnings before interest, taxes, depreciation, and amortization) margins up to 186 basis points (bps) to 21.5 per cent in Q4CY22 from 23.4 per cent, in the year-ago period.
 

Profit-after-tax (PAT), meanwhile, is expected to grow 57.2 per cent YoY to Rs 608 crore, while dropping 9.1 per cent quarter-on-quarter (QoQ) from Rs 668 crore in Q3CY22.
 

In the October-December quarter, shares of Nestle rose 2.4 per cent, while peers like Hindustan Unilever dropped 5 per cent, and Britannia gained 12 per cent. In comparison, the S&P BSE Sensex gained 6 per cent, during the same period.
 

Key monitorables: Demand outlook on rural versus urban, competitive intensity, raw material price trends, demand, and material costs.
 

Here's a list of brokerage estimates ahead of Nestle India's Q4CY22 results:
 

Sharekhan

The brokerage firm projects 17 per cent YoY revenue growth to Rs 4,361 crore in Q4CY22, driven by price hikes, and distribution expansion. Both India and exports businesses are likely to report double-digit YoY growth, analysts added. Gross margin, however, is likely to reduce 280 bps YoY, while operating profit margin will be lower by 190 bps YoY, due to higher input costs.
 

Motilal Oswal

Analysts expect growth momentum in sales to continue in the fourth quarter of CY22, rising up to 16 per cent YoY to Rs 4,338 crore from Rs 3,739 crore, in the year-ago period. However, higher agri-commodity prices are likely to contract Ebitda margins 130 bps YoY to 21.5 per cent. The brokerage firm estimates higher contributions to come in from out-of-home consumption.
 

Axis Securities

While analysts model 16 per cent YoY revenue growth to Rs 4,314 crore in Q4CY22, it is likely to decline 5.5 per cent in terms of quarter-on-quarter (QoQ) from Rs 4,567 crore in Q3CY22. PAT, on the other hand, is estimated to grow 57.2 per cent YoY to Rs 608 crore, but a drop of 9.1 per cent is likely on a sequential basis.
  

Phillip Capital

The brokerage firm forecasts mid-single digit volume growth as tailwinds related to packaged foods remain strong. However, gross margins are likely to remain under pressure, on the back of higher agri-inflation, and increased focus on LUP (low-unit price packs) as it penetrates deeper into rural areas. They expect gross margins to contract 207 bps YoY to 54.6 per cent from 56.6 per cent.
 

Nirmal Bang

A topline growth of 17.5 per cent YoY is likely, said analysts, coupled with 12 per cent YoY volume growth in Q4CY22. While gross margins are expected to expand 160 bps QoQ, Ebitda margin is likely to contract 50 bps QoQ to 21.6 per cent. Meanwhile, Ebitda and adjusted PAT is expected to grow 11.5 per cent YoY, and 10.7 per cent YoY, respectively.