Net profit for the fourth quarter is seen falling 5% year-on-year (YoY), according to an average estimate of six brokerages. On the flip side, revenue may grow 5%.
Analysts forecast strong beverage business performance on the back of pricing-led growth in coffee. However, the dairy business remained under stress.
Gross margins are likely to contract by 131 bps YoY while higher A&P spends would lead to EBITDA margin contraction by 113 bps YoY.
Here’s what analysts expect from Q4:
Kotak Equities
We expect 5.4% YoY revenue growth, led by 5.3% YoY growth in domestic/exports markets. We expect volume (tonnage) growth at 3%, versus 2% in 3Q. The price mix growth is led by price hikes in chocolates, coffee and Maggi.Gross margin could contract 185 bps YoY to 55%, impacted by sharp inflation (in the range of 50-70% YoY) in coffee, cocoa and edible oils. We expect the EBITDA margin to also decline 190 bps YoY to 23.5%. Overall, we expect the EBITDA to decline 2.4% YoY, but the PAT decline could be higher due to lower other income (lower cash balance after investment of Rs7 bn in JV with Dr Reddy’s).
Nuvama
We reckon consolidated revenue to grow 5% YoY. Domestic sales are likely to grow 5-6% YoY, while domestic volumes will grow 3% YoY. Overall demand trends have improved sequentially given marginal recovery in urban areas – however slowdown still persists.
Exports revenue likely to grow 7% YoY. We expect gradual price hikes of 2% in Q4FY25 (1% in Q3FY25; 4% in Q4FY24) mainly led by coffee but certain price hikes seen across portfolios (eg – in Maggi Noodles recently increased the price of 70 gm pack from Rs 14 to Rs 15).
We reckon EBITDA to grow 2.6% YoY owing to the high base. Given cocoa, coffee and palm oil cost remains inflationary, Gross/EBITDA margin is likely to decline 20bp YoY to 57%.
Motilal Oswal
We expect sales growth of 5% YoY. However, while demand recovery is underway, a higher dependency on urban markets may weigh on NEST volumes. The company has likely implemented a price hike in response to rising commodity prices.
We model moderation in GP (-100 bps) and EBITDA margins (190bp), impacted by a sharp rise in coffee and edible oil prices.
Nestle focuses on expanding its distribution reach, premiumization, and innovations.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)