Nestle: The blue chip - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

Nestle: The blue chip

Dec 21, 2001

Nestle has done well in the last three quarters despite the difficult market conditions. During the nine months of 2001 the company has clocked an 18% growth in topline and an even healthier 33% growth in bottomline. If 2001 was a tough year, imagine what a good year will do to the growth numbers. Nestle achieved this with the help of increased sales (new product introductions), lower commodity prices and improved asset rotation which however, were partially offset by the costs associated with water, liquid milk/chilled dairy businesses. The lower provision for contingencies and reduction in income tax rate also contributed to the increase in net profit.

However, despite the sterling performance, the Nestle management has always been cautious of future growth. During the September quarter results, Nestle India chairman & managing director, Mr Carlo Donati commented and we quote, "The continuing excellent performance of Nestle India reflects the integrity of the Nestle culture. The focus on consumer and the professionalism of our executives has sustained innovation and renovation within the company and their pragmatic attitude has ensured excellent top-line and impressive bottom-line contribution for Nestle India. However despite these strengths, the uncertain and difficult domestic and international market environment coupled with the seasonality factors will impact our performance in the fourth quarter."

The company faces an uphill task of garnering market share both in bottled water as well as dairy products. Bottled water segment is already littered with numerous high profile players like Bisleri, Pepsi and Coke. In the dairy segment Amul seems way ahead of competition. Britannia too is gearing up its act.

However, notwithstanding the management’s reservations on growth and the tough road ahead for new businesses, the stock is a true blue chip. During the September quarter, we consolidated the financials of five leading companies in the food-processing sector. The sector showed a growth of 6% in topline and a 22% growth in bottomline. On the other hand, Nestle recorded a 14% topline growth and a 39% net profit growth during the same quarter.

It is no wonder that Nestle continues to trade at a premium to its peers. While many index heavyweights have seen volatility in valuations, Nestle continues to trade at Rs 500, a P/E of 27x FY02 projected earnings. In the short term, the stock is likely to remain range bound as investors await the company’s success rate in new businesses. Over the longer term however, Nestle is a true blue chip and cannot be avoided while building a portfolio, owing to its management focus and credibility.

Equitymaster requests your view! Post a comment on "Nestle: The blue chip". Click here!


More Views on News

Nestle India Sees Double-Digit Growth Across Segments in March Quarter (Company Info)

Apr 21, 2021

Key takeaways from Nestle's March quarter (Q1CY21) results.

NESTLE 2018-19 Annual Report Analysis (Annual Result Update)

Dec 9, 2020 | Updated on Dec 9, 2020

Here's an analysis of the annual report of NESTLE for 2018-19. It includes a full income statement, balance sheet and cash flow analysis of NESTLE. Also includes updates on the valuation of NESTLE.

NESTLE Announces Quarterly Results (2QFY21); Net Profit Down 1.4% (Quarterly Result Update)

Oct 26, 2020 | Updated on Oct 26, 2020

For the quarter ended September 2020, NESTLE has posted a net profit of Rs 6 bn (down 1.4% YoY). Sales on the other hand came in at Rs 35 bn (up 10.1% YoY). Read on for a complete analysis of NESTLE's quarterly results.

Varun Beverages Q1 Review: Net Profit Rises Two-Fold; Board Announces 1:2 Bonus Issue (Views On News)

May 4, 2021

Varun Beverages' two-fold jump in profit came on the back of strong volume growth and demand recovery.

Burger King IPO: Should You Subscribe to This QSR Chain Business? (IPO)

Dec 2, 2020

Does the company with one of the fastest-growing QSR chains in India have sound prospects?

More Views on News

Most Popular

Hotel Stocks Will Reward Investors (Fast Profits Daily)

Jun 8, 2021

This is why I'm bullish on the hotel and hospitality sector.

My 'Unlock' Investments (Fast Profits Daily)

Jun 11, 2021

The best unlock investments you can make in the market.

The Most Visible Sign of India's Revival is on Two Wheels (Profit Hunter)

Jun 9, 2021

Investing in the best stocks could result in wealth compounding on a massive scale.

How I Discovered a 400-Year-Old Open Secret to Extreme Wealth (Profit Hunter)

Jun 11, 2021

Charlie Munger's open secret about investing success.


India's #1 Trader
Reveals His Secrets

Secret To Increasing Your Trading Profits Today
Get this Special Report,
The Secret to Increasing Your Trading Profits Today, Now!
We will never sell or rent your email id.
Please read our Terms


Jun 18, 2021 (Close)