Nestle India Limited

Nina Rajaratnam
About Nestle
 Nestle India is the third largest FMCG company
in India after Hindustan Unilever and ITC.
 It dominates the culinary and the hot
beverages segments in India.
 It also has a significant presence in baby foods
and has emerged as a strong No. 2 player in
the dairy segment (after Amul) and
chocolates (after Cadbury’s).
 In each of the segments, the company has
been growing through new product launches
and new price point presence.
 In the past 5 years, Nestle’s topline and net
profits have recorded a CAGR of 15% each.
Current Scenario
 Nestle has ear marked a capex of Rs. 6 bn in
FY09 towards expanding its chilled dairy
portfolio, capacity expansion at its existing
manufacturing facilities in Moga (Punjab) and
Samalkha (Haryana), sprucing up its
distribution network and new R&D.
 The company is also considering a re-entry into
the water business by acquiring an existing
brand.
Snapshot
Attribute Value Date
Name Nestle India Ltd.
Sector FOOD AND FOOD
PE ratio PROCESSING
41.81 11/08/10
EPS (Rs) 67.93 Dec, 09
Current Price 2830.8 12th August 2010
Sales (Rs crore) 1,471.30 June 2010
Face Value (Rs) 10
Net profit margin (%) 12.67 Dec, 09
Last bonus 1:2 23/04/96
Last dividend (%) 215 19/02/10
Return on average 112.68 Dec, 09
equity
Dividends
Year Month Dividend (%)
2010 Feb 215
2009 Oct 270
2009 Mar 210
2008 Oct 220
2008 Mar 110
2007 Nov 240
2007 Mar 80
2006 Nov 180
2006 Mar 80
Daily Share Price Range of Nestle India Ltd.
Date High Low Close PricePrice Price
12/08/20102846.0 2800.0 2830.80 Range
46.00 Range
1.64 %
11/08/20102852.0 2775.55 2828.10 76.45 2.75
10/08/20102840.0 2791.85 2818.70 48.15 1.72
09/08/20102830.0 2769.95 2790.80 60.05 2.17
06/08/20102830.0 2750.1 2769.90 79.90 2.91
05/08/20102940.0 2765.0 2798.30 175.00 6.33
04/08/20103020.0 2900.0 2907.10 120.00 4.14
03/08/20103085.0 2956.6 2962.95 128.40 4.34
02/08/20103040.0 3007.2 3022.80 32.80 1.09
30/07/20103033.3 2960.5 3020.65 72.80 2.46
29/07/20103027.55 2950.0 2965.50 77.55 2.63
Head and Shoulder – July 1, 2010 to Aug 11, 2010
One year share prices- Sep 09-Aug 10
Sept 2009 – Aug 2010
• Despite the economic
slowdown, there was a 17 per
cent jump as compared to the
same period a year earlier.
• The Nestle India management
says its strong and diversified
portfolio helped it tide over
the financial crisis
• The prepared dishes and
cooking aids segment
registered a growth of 1.6
percentage points, to account
for 25.5 per cent in the
period. Its main revenue
earner, the milk products &
nutrition category, was almost
flat, accounting for 46.3 per
cent of net sales.
• Nestle’s exports, though, did
take a beating from the
slowdown and indicated a dip
of 8.9 per cent in volume
Sept 2009 – Aug 2010
•
• Foods and beverage major
Nestle India reported a 6.7
per cent fall in net profit at
Rs 112.92 crore for the
fourth quarter ended
December 2009, due to
increase in raw material
costs
• Exports were down by 2.9
per cent on account of
lower sales to Russia and
Bangladesh, partly offset
by improved realisations
due to a weaker rupee
during most of the year.
• the operating margins
were partially offset by
higher expenditure on
advertising and sales
promotion and actuarial
Sept 2009 – Aug 2010
•

• Food inflation coupled with

higher ad spend and
employee cost has taken a
toll on its performance
during the period.
•
•

• The company posted a 7%

drop in net profit, against
a market estimate of 46%
growth in net profit.
Sept 2009 – Aug 2010
•

• Nestle gained the most in

more than a month after
saying it is planning its
first domestic acquisition.
•
• The company plans to
acquire a company to
expand its product line.
•
• The shares gained 2.2
percent, the biggest jump
since May 24, to 2,942.9
rupees at the 3:30 p.m.
close of trading in
Mumbai.
•
•
•
• The Bombay Stock
Sept 2009 – Aug 2010
•
• Nestle said that while net
profit margins have been
positively impacted by the
reduction in income tax
rates, material costs
remained high due to
soaring commodity prices,
especially milk solids and
sugar.
• Commodity prices have
spiked to record high
levels such as milk
increased by 30 per cent,
sugar 70 per cent and
wheat 25 per cent.
Sept 2009 – Aug 2010
•
•
• Nestle's domestic sales
have increased by 20.2
per cent, while exports
grew by 36.2 per cent,
largely on account of sales
to Russia.
• According to analysts, the
numbers indicate decent
growth despite the
challenges such as high
input prices and logistics
costs.
• However, earnings were
adversely impacted by the
appreciation of the Indian
rupee against the US
dollar.
Sept 2009 – Aug 2010
•
• The results of Nestle India
were more or less in line
with expectations.
• However, the outlook on
the share price is not the
same, it’s a tad low.
• According to analysts, the
company’s share price
trades at a premium of
around 120 per cent to the
Sensex due to its superior
branding and product
strategies.
• Five-year average
premium is also 80 per
cent to the Sensex, hence,
120 per cent looks a tad
expensive for this fast
moving consumer goods
(FMCG) major.
5 Year Share Prices – Elliot’s wave
Elliot’s Wave Theory
Comparison with competitors
Simple Moving Average
Stochastics – Aug 12, 2009 to Aug 12, 2010

%K = (Today's closing price - lowest low during the last [period] days) ÷ (highest
high during the last [period] days - lowest low during the last [period] days)
Once the %K stochastic is obtained, the %D stochastic is arrived at by calculating a
short-term moving average of the %K value
Nestle Vs Sensex
Conclusion
 The food processing business in India is at a
nascent stage. Currently, only about 10% of
the output is processed and consumed in
packaged form thus highlighting the huge
potential for growth.
 Existing markets are not fully tapped and the
company can increase presence by
penetrating further.
 With India's demographic profile changing in
favour of the consuming class, the per capita
consumption of most FMCG products is likely
to grow.
Thank You