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Nestle India Dupont Analysis

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Nestle India

( NESTLEIND | BSE CODE: 500790 )


INR 2611.50
52 Week (High - INR 1788.00 - & Low - 2769.30)

About the company


Nestle India, a subsidiary of Nestle SA (with a 62% stake), is the world’s largest food company based on revenue. Established in
India since 1912, it initially traded as The Nestlé Anglo-Swiss Condensed Milk Company, gradually expanding its presence. The
company holds strong market positions across various product categories, particularly in culinary products like Maggi, and ranks
among the top two players in milk products and nutrition, beverages, prepared dishes and cooking aids, and chocolate and
confectionery.

Financial Summary

Revenues (INR Crs.) Net Profit (INR Crs.) Average Total Assets (INR Crs.)
9,338
2,391 8,067 8,607
19,296 2,355 2,356 7,479
16,897
14,741
13,350

2,082

2020 2021 2022 2023 2020 2021 2022 2023 2020 2021 2022 2023

Return on Equity (%) Return on Asset (%) Financial Leverage

119% 29% 4.07x 3.91x


109% 3.80x
106% 28% 28% 3.32x
84%
25%

2020 2021 2022 2023 2020 2021 2022 2023 2020 2021 2022 2023

Nestle India Ltd.'s Q4 FY24 Performance Overview:


• Despite a relatively weaker base compared to preceding quarters, Nestle India Ltd.’s sales for Q4 FY24 failed to meet
expectations. Even with a 8.9% growth in domestic sales, it was primarily driven by price and mix adjustments rather than
increased volumes, as highlighted in the press release.
• The management attributed this underperformance to a challenging business environment, reflecting broader economic
conditions impacting consumer spending patterns.
• However, amidst the sales disappointment, the company managed to maintain EBITDA and profit after tax in line with
expectations. This was supported by positive surprises in both gross and EBITDA margins, signaling efficiency in cost
management and operational performance.
• Despite the sales setback, the company remains optimistic about the growth potential in the Indian packaged food sector.
Nestle, alongside Britannia Industries Ltd., has been instrumental in driving growth over the past decade, positioning itself
at the forefront of industry expansion.
• Additionally, Nestle continues to exhibit strong fundamentals, including best-of-breed return on capital employed.
Nevertheless, concerns persist regarding the company's relatively high valuation, currently standing at approximately ~70x,

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Dupont Analysis - Return on Equity & Return on Asset

Return on Equity (ROE)


FY2018 FY2019 FY2020 FY2021 FY2022 FY2023
Net Profit 1606.9 1968.2 2082.4 2354.8 2390.6 2356.1
Average Shareholder Equity 3547.2 2796.3 1969.1 1982.9 2202.8 2812.6
Return on Equity 45.30% 70.39% 105.75% 118.76% 108.53% 83.77%

ROE - Dupont Equation


FY2018 FY2019 FY2020 FY2021 FY2022 FY2023
Net Profit 1606.9 1968.2 2082.4 2354.8 2390.6 2356.1
Revenue 11292.3 12368.9 13350.0 14740.6 16897.0 19296.5
Net Profit Margin (A) 14.23% 15.91% 15.60% 15.97% 14.15% 12.21%

Revenue 11292.3 12368.9 13350.0 14740.6 16897.0 19296.5


Average Total Asset 7725.3 7573.3 7479.0 8067.0 8606.7 9338.3
Asset Turnover Ratio (B) 1.46x 1.63x 1.79x 1.83x 1.96x 2.07x

Average Total Asset 7725.3 7573.3 7479.0 8067.0 8606.7 9338.3


Average Shareholder Equity 3547.2 2796.3 1969.1 1982.9 2202.8 2812.6
Equity Multiplier (C) 2.18x 2.71x 3.80x 4.07x 3.91x 3.32x

Return on Equity (A*B*C) 45.30% 70.39% 105.75% 118.76% 108.53% 83.77%

Return on Asset (ROA)


FY2018 FY2019 FY2020 FY2021 FY2022 FY2023
Net Profit 1606.9 1968.2 2082.4 2354.8 2390.6 2356.1
Average Total Asset 7725.3 7573.3 7479.0 8067.0 8606.7 9338.3
Return on Asset 20.80% 25.99% 27.84% 29.19% 27.78% 25.23%

ROA - Dupont Equation


FY2018 FY2019 FY2020 FY2021 FY2022 FY2023
Net Profit 1606.9 1968.2 2082.4 2354.8 2390.6 2356.1
Revenue 11292.3 12368.9 13350.0 14740.6 16897.0 19296.5
Net Profit Margin (A) 14.23% 15.91% 15.60% 15.97% 14.15% 12.21%

Revenue 11292.3 12368.9 13350.0 14740.6 16897.0 19296.5


Average Total Asset 7725.3 7573.3 7479.0 8067.0 8606.7 9338.3
Asset Turnover Ratio (B) 1.46x 1.63x 1.79x 1.83x 1.96x 2.07x

Return on Asset (A*B) 20.80% 25.99% 27.84% 29.19% 27.78% 25.23%

Dupont Summary
• Nestle's ROE remained stable until FY 2023, dipping slightly to 83.77%, with a decline in net profit margin to 12.21%.
• Asset efficiency improved notably from 1.46 in 2018 to 2.07 in 2023, potentially boosting profitability.
• Financial leverage mostly steady but spiked in 2021 before settling at 3.32 in 2023.
• ROA peaked at 27.84% in 2021 before stabilizing at 25.23% in 2023, suggesting a temporary performance surge.

Disclaimer: This report is made as a part of educational assignment and is meant for educational purpose only. The author of the report is not liable for any losses due to
the actions taken basis this report. it is advisable to consult SEBI registered research analyst before making any investments.

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