Nestle India Ltd’s shares closed 3% up on Thursday on NSE despite the company’s earnings for the June quarter (Q2CY22) missing analysts’ estimates. What gives? Several reasons: Decent sales growth, rural uptick, a pet foods’ business acquisition and a launch of brand in toddler nutrition.
The company follows a January-December financial year; so, the June quarter is its second. Total operating revenues in Q2 rose 16.1% year-on-year (y-o-y) to nearly ₹4,037 crore, primarily driven by domestic sales. Domestic revenues, which comprised 95% of its operating revenue, rose by 16.4% y-o-y. For perspective: domestic growth in Q1 was 10.2%. Its domestic sales growth in Q2 is broad-based with a healthy balance of pricing, and volume and mix.
“Management commentary towards broad-based growth across categories and uptick in rural market in Q2CY22, coupled with the announcement of entering into fast-growing, high-margin pet care category and introducing the Gerber brand in India.
Shares of Nestle India Ltd closed with gains of 3% on the NSE on Thursday despite the company’s June quarter (Q2CY22) earnings not being predictable by analysts. what gives? Several reasons: good sales growth, rural uplift, pet food business acquisition and brand launch in baby nutrition.
The company follows a January-December fiscal year; So, June quarter is its second. Total operating revenue in Q2 grew 16.1% year-on-year (YoY) to approx. 4,037 crore, primarily driven by domestic sales. Domestic revenue, which comprised 95% of its operating revenue, increased 16.4%. For perspective: Domestic growth in Q1 was 10.2%. Its home sales growth in Q2 is broad-based, with a healthy balance of pricing, and volume and mix.
According to Nestle India, in the post-pandemic world, pet adoption is on the rise and the pet food business is expected to have a Compound Annual Growth Rate (CAGR) of 50% over 2022-2026, which is the 2018- There is a CAGR of 39.4% in 2021.
“The pet food business is a high-margin business and this is likely to work in favor of overall margin improvement in the long run,” said Sachin Bobde, analyst at Dolat Capital Markets.
Separately, the Gerber brand’s launch in the toddler nutrition segment provides products to accelerate growth in the category. Kulkarni said, “Nestlé India has recently been witnessing increased competition from Abbott’s Similac and PediaSure. By introducing the Gerber brand in India, Nestlé can now protect its segment from other companies.”
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