Moderating in-home consumption should benefit key segments while complete revival of Out-of-home consumption is expected to propel topline further in the near term. Hence, we upgrade our rating on the...

We value Nestle at 55x P/E on CY22E EPS to derive a TP of Rs 16,326. The stock is trading at 58x P/E on CY22E EPS and limits absolute upside in the medium term, making the risk-reward unattractive. Maintain REDUCE. Nestles 4QCY20 revenue growth was largely in line with beat in gross margin. High employee cost (long-term compensation arrangements to factory employees) impacted the margin (miss in EBITDA). Domestic revenue grew by 10% YoY while exports were down by 8% YoY. Thereby, overall revenue growth of 9% was slightly below estimates (HSIE 11%). Packaged food category continued to perform well, and Nestles performance in CY20 was steady (8% YoY growth). Maggi, Kitkat and Nescafe (in-home consumption) posted double-digit growth during the year, capitalising on the reduced mobility among consumers. However, weak coffee exports impacted overall exports (-8% in 4Q and +1% in CY20). GM expanded by robust 231bps YoY to 59%, the highest in the past eight quarters. EBITDA grew by 10.4% as compared to our expectation of 17% growth; the key difference was due to high employee cost (25% up YoY). We expect Nestle to deliver steady earnings growth, aided by new launches and improved distribution. Moderation in in-home consumption categories will impact key brands but revival in OOH will support growth. We maintain our EPS estimate for CY21E/CY22E

Continued thrust on new category, product launches The company continued its thrust on new launches & foray in subcategories. New launches are contributing 3-4% of total sales. Moreover, ecom channels' contribution has more than doubled in CY20 at 3.7% to total sales. NIL has been aggressive in terms of new launches in the last five years with introduction of more than 70 new products, variants. It forayed into breakfast cereals poha, upma in last two years that have grown faster in CY20. It has also been raising its marketing spend to support these brands. With higher consumption in rural areas, smaller towns, it is increasing its rural penetration by introducing smaller SKUs across segments. We...

Nestle India's (NEST) 4QCY20 margins missed our estimates. While revenue was only 1.8% below our estimate, mainly affected by lower coffee exports, domestic sales grew in double digits for the second consecutive quarter. NEST's 4QCY20 revenue grew by 9% YoY to Rs34.3bn (vs our est. 11% growth to Rs34.96bn). Domestic sales grew by 10.1% YoY to Rs32.6bn while exports (~4.6% of sales for the quarter) declined by 7.7% YoY to Rs1.57bn. Gross margin was up 230bps YoY at 59.1% and +100bps QoQ (vs our est. 58%) due to lower commodity prices, particularly milk and its derivatives. Higher marketing spends led to 60bps YoY increase in other expenses, which included CSR spends (up 11.7% on an absolute basis). This along with higher staff costs as a % of revenue (+150bps YoY; up 25.2%...

Demand in Out of Home channels has improved sequentially. We are reducing CY21/22 EPS estimates by 4.6%/3.8% on the back of high employee cost witnessed during the quarter. Double digit growth in key brands like Maggi, Kitkat and Nescafe along with improvement in Out of Home...

disappointments in the Dec'20 quarter results of peers with high in-home consumption, NEST's 10.1% domestic sales growth was healthy. This means that barring the COVID-led lockdown affected earnings in the Jun'20 quarter, domestic sales growth has been healthy for the rest of CY20. While gross profit was in line, there was a miss at the EBITDA and PAT level, largely attributed to higher marketing costs in 4QCY20 (as per its press release). This is actually a positive going forward as it indicates the management's confidence in its growth prospects. NEST doesn't disclose...

3QCY20 & YTD performance: In 3QCY20, as production output normalized, overall topline grew by 10.2%, led by volume growth of 6.5%, improving progressively from Upside/Downside: NIL 2QCY20 which had registered a value growth of 2.6% on account of 0.3% decline in Vishal Punmiya volume (refer Exhibit 6). The double-digit growth in 3QCY20 topline was led by strong Research Analyst performance in Nescafe, Kitkat, Everyday, Maggi Noodles & MasalaEMagic. Exports vishal.punmiya@nirmalbang.com suffered in 2QCY20 due to logistics issues but recovered in 3QCY20. Out of Home (OOH) +91-22-6273 8064 consumption categories are showing some signs of recovery but still remain impacted. Overall YTD topline performance has been impacted by the Covid-19 pandemic. YTD Key Data...

Nestle India Analyst Meet highlighted its strategy to sustain double digit volume led growth led by focus on 1) Innovation and Renovation in existing segments 2) distribution expansion across channels. NEST achieved 6.2% volume growth in 3Q (8.2% and -0.3% in 1Q and 2Q) and 5% in 9mCY20 even as Rural growth is currently 2x urban growth at ~12%. NEST plans to invest behind emerging categories like breakfast cereals (Nesplus), Milo (MFD), Nescafe RTD and Nutraceuticals (Resource and Optifast) and3). We believe renewed thrust on Maggi (3Q growth at 19.1%) is...

The company's total sales and domestic sales both increased by 10.2% driven by volume and mix. Export sales increased by 9.4%. Demand in out of home channel improved through the quarter but continues to be impacted by COVID....

For Q3CY20, Nestle India reported revenue growth of 10.1% YoY (+16.1% QoQ) to INR 35,417 mn Domestic Sales increased by 10.2% YoY largely driven by volume & mix. Along with this, Export Sales increased by 9.4%. EBITDA margin improved by 158bps YoY to 24.9% (+44bps QoQ) mainly due effective inventory management and other expenses Net Profit declined marginally by 1.4% YoY / (up by 20.7%) to INR 5,871 mn with NPM of 16.6% (down 194bps YoY / up 62bps QoQ);...

Nestle India (NEST) reported a perfectly in-line performance across key metrics for Q3CY20. Reported Revenue grew 10.2% YoY at Rs. 3,525cr in line with our estimate of Rs. 3,520cr. Domestic sales reported 10.2% driven by 7% volume and 3.2% price/mix led growth as per our estimates.

Nestl's Q3CY20 results beat our estimates on all counts with 10% volume and mix growth in the domestic market. In-house consumption brands witnessed double digit growth supported by improved supply situation. However, out of home categories continues to remain impacted due to pandemic fears. E-com business (4% contribution) witnessed strong acceleration with 97% growth. Exports increased 9.4% YoY. We have revised our CY20E, CY21E and CY22E EPS estimates at Rs 223...

Mphasis: We maintain BUY on Mphasis (MPHL), following a strong 2Q performance and high growth visibility ahead. We are positive on MPHL, based on (1) large deal wins (TCV of USD 1bn+ TTM new deal wins with highest-ever TCV in 2Q), with the increasing deal size in NewGen/Digital wins and deal pipeline (+75% YoY) providing high growth visibility, (2) strong BFS portfolio driven by consolidation deals in large accounts as well as the mortgage segment, (3) services re-alignment, integrated deals (Apps, IMS, BPM) and the focus on hyperscaler partnerships have supported 3x growth in cloud deal pipeline (27% and 60% of cloud pipeline includes AWS/Azure channel), and (4) increased focus in Europe geography. MPHL's valuation discount to mid-tier IT is expected to reduce, supported by an improving mix of high-growth Direct business limiting the impact from DXC and on FCF yield >6%, ~30% RoIC, FY20-23E EPS CAGR at 14% (16.5% over FY21-23E). Our target price of Rs 1,655 is valued at 20x Sep-22E EPS. Crompton Consumer: Crompton posted a robust 2QFY21, beating our as well as the street's expectations. ECD growth of 18% was primarily driven by volume growth (not led by channel filling and pent-up demand). It was heartening to know that order frequency by trade partner has increased and reflects healthy retail demand. Crompton saw healthy market share gains across segments. Lighting margin recovery was strong with a price hike, product mix and cost control. B-C lighting saw 9% YoY volume growth while B-B (ex B-G) was flat. Owing to quicker recovery in B-C,...

Nestle India (NEST) has returned to double digit growth, meeting our expectations for 3QCY20. NEST's 3QCY20 revenue grew by just 10.1% YoY to Rs35.4bn (vs our est. 11.5% growth to Rs35.86bn). Domestic sales grew by 10.2% YoY to Rs33.5bn while exports (~5% of sales for the quarter) grew by 9.4% YoY to Rs1.75bn. The quarter witnessed growth driven by an improved supply situation, as factories returned to normal output. Enhanced by an increase in inhome consumption, key brands like MAGGI Noodles, MAGGI Sauces, KITKAT, Nestl MUNCH, NESCAF CLASSIC and NESCAF SUNRISE witnessed double-digit growth each. Demand in Out of Home' channels improved during the quarter but continued to be affected due to the current...

Boosted by in-house demand, brands like Maggi Noodles & Sauces, Kit Kat, Munch, Nescafe Classic and Sunrise registered double-digit growth in Q3CY2020. Rising in-house consumption, sustained new launches and expansion in...

Commits to invest Rs 26bn in India over next 3-4 years We are upgrading NEST to HOLD from reduce given 1) resilient performance 2) growth visibility given Rs26bn investment program 3) sustained performance in key brands like Maggi, Kitkat, Munch, Nescafe 4) 80%...

Nestle is well positioned to capture the immense growth opportunity given its market leadership, consumer loyalty and trust, lower penetration, healthy cash flow generation, growing demand for packaged / instant food given tailwinds from rising in-home consumption. We initiate coverage with BUY

Multi Commodity Exchange: MCX market share increased to 96.7% (+530bps YoY), which demonstrates the core strength of the franchise. Both revenue and margin performance was weak in 1Q but stood better than expectation. Trading volume was down 37% QoQ in 1Q due to the impact of COVID-19, change in exchange timing (April-20) and crude fiasco, which recovered strongly to pre-COVID levels in July-20 (Rs 346bn, ~5% below 4Q level). Bullion (57% of volume) continues to drive volume (+52% above 4Q level) supported by volatility in gold/silver prices. Crude (~25% of volume) is impacted by the high margin requirement (~100%) and extreme volatility. Tailwinds like institutional participation, indices launch (Aug-20), and increasing retail penetration should boost volumes. We increase the EPS estimate for FY21/22E by +27.4/+13.6% to factor in volume recovery and better margin. The stock has rallied ~48% in the last three months and now trades at a PE of 33/28x FY21/22E EPS. We assign 30x to June-22E core PAT and add net cash (ex-SGF) to arrive at a target price of Rs 1,600. Maintain ADD. V-Guard Industries: V-Guard posted a disappointing set of numbers as the company clocked revenue/EBITDA decline of 42/87% YoY (HSIE expectation -45/-52% YoY). Non-south performance remained weak and contracted by 47% (21% dip in 4QFY20). The company is the No. 3-4 player in non-south markets, and channel partners continue to prefer market leaders on priority. It impacted V-Guard even in 4QFY20. Stabiliser was most impacted (51% dip in Electronics segment) as demand of RAC was impacted sharply by the lockdown. Electricals/Consumer...