Nestle's descending performance - Views on News from Equitymaster

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Nestle's descending performance

Mar 7, 2001

Nestle India has declared a 20% growth in profits for the year ended December '00. The company's topline growth at 8.7% was however, disappointing. While domestic sales grew at a slower rate of 7%, exports were higher by 16% during the year.

Year ended December (Rs m) FY00 FY01 Change
Sales 15,439 16,775 8.7%
Other Income 83 107 28.9%
Profit after Tax/(Loss) 985 1,186 20.4%
Net profit margin (%) 6.4% 7.1%  
No. of Shares (eoy) (m) 96.4 96.4  
Diluted Earnings per share 10.2 12.3  
P/E (at current price)   43  

Revenue growth of the company in the December quarter slowed down to 4% compared to its outstanding performance in the past two quarters ( 2QFY01-15% and 3QFY01-13%). This could be due to stiff competition in the chocolate confectionery market from its competitor Cadbury and in the ketchup segment HLL has given it a tough time.

At the current market price of Rs 531 Nestle trades at a P/E multiple of 43 times with a market cap to sales ratio of 3 times. The company's current valuations are comparatively higher than Cadbury which gets P/E multiple of 32 times. But this is because Nestle has a broader product portfolio as compared to Cadbury.

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