Nestle Q1 Preview: Revenue likely to rise 12-15% YoY on price hikes; volume growth to be muted

FMCG major Nestle India's growth momentum in sales is likely to taper off in the January-March quarter, however, it will still likely remain in double-digits.

The revenue growth will mostly be driven by price hikes and the underlying volume growth is likely to be muted at 3%, according to analysts. Meanwhile, margins are also likely to be under pressure compared with the previous year period due to inflation in key input prices.

Nestle will come out with its first-quarter results on April 25. The company follows a January-December financial year.


"We expect revenues to grow by 14.5%. Gross margins to contract by 89 bps year-on-year (YoY). EBITDA margins expected to contract by 58bps YoY at 22.8%," Prabhudas Lilladher said. The sales figure is likely to be anywhere between Rs 4,557 crore to Rs 4,491 crore, according to this brokerage.

For the fourth quarter, Nestle India posted a 66% year-on-year rise in net profit at Rs 628 crore, while sales rose 14% to Rs 4,233 crore.

The company has reported an EBITDA of Rs 973 crore for the fourth quarter ended December 2022, higher by 14%, while margins stood at 22.9%.

"We expect 12% YoY revenue growth, which is pricing led. The gross margins will likely improve by 4 ppt YoY, albeit slightly lower quarter-on-quarter. Expect a 17% EBITDA margin, lower than that of 19.5% in the December quarter," Jefferies said.

Operating profit, as seen as earnings before interest, taxes, depreciation and amortisation (EBITDA), is expected to grow by 12% to Rs 930 crore for the quarter under review, according to analysts.

Motilal Oswal is modelling an EBITDA growth of 14% YoY with an EBITDA margin of 23.9%

So far this year, Nestle shares have risen nearly 5%, compared with a 3% decline in the benchmark Nifty.

"We model 13% YoY growth in net domestic revenues, entirely led by price increases. Volume (tonnage) is likely to decline marginally, owing to continued share loss in Maggi LUP and weak trends in milk/nutrition portfolio," Kotak Institutional Equities said.

The brokerage believes Nestle's profit to be around Rs 692 crore for the first quarter, which is higher by 17% year-on-year.

Some of the key things to monitor include the commentary on the milk and nutrition segment and the same on demand and material costs.

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