Nestle India gains as Macquarie expects strong operating income with higher volume growth

Food and drink company Nestle India shares gained nearly a percent in morning on Tuesday as global investment firm Macquarie remained bullish on the stock.

The brokerage, which is 5-6 percent ahead of street earnings estimates for CY19/CY20, expects strong operating leverage with higher volume growth for the company.

It believes the company can outperform street expectations on revenue growth & margin expansion.

“We are building in 15 percent revenue growth in CY19 versus street expectation of 13 percent growth and building in 100 bps expansion in margin in CY19,” Macquarie said.

Meanwhile, the FMCG major has lined up nearly two-three dozen products that it plans to launch in calendar year 2019 across categories in the country to drive its aggressive growth plans, Chairman and Managing Director Suresh Narayanan said on February 18.

The company, whose 6 percent revenues come from exports, is now looking to tap more overseas markets by targeting countries with higher Indian diaspora such as SAARC and South East Asia.

“In 2018, our core brands have performed well…We look forward for greater acceleration as we go forward….We have two-three dozen projects (products) in pipeline for launch in 2019. These products are across categories,” Narayanan told reporters.

While the domestic market has been driving its growth, Narayanan said Nestle India would now look at expanding its export basket.

Nestle India, at present, has eight factories across the country. The company also did not rule out evaluating inorganic growth in the country and said it may consider it if any opportunity arises. (With inputs from PTI)

Nestle India had reported a 9.6 percent increase in net profit at Rs 341.76 crore for the fourth quarter ended December 31, 2018.

Total sales increased by 11.2 percent while domestic sales grew 12 percent in the December quarter supported by volumes and was broad based, it said.

For the full year ended December 31, 2018, Nestle India said its net profit was at Rs 1,606.93 crore as against Rs 1,225.19 crore in the previous financial year. Total income for the year stood at Rs 11,551.19 crore as compared to Rs 10,369.1 crore in the year-ago period.

At 10:12 hours IST, the stock was quoting at Rs 10,475.00, up Rs 39.30, or 0.38 percent on the BSE.