Nestle India Q3 Results: Stock rises aided by volume-led sales growth, ad spends keep margins in check

Nestle India Ltd. reported results for the December quarter that were higher on the topline and EBITDA front, but margins narrowed from last year and also missed expectations. The stock gained as much as 3% in response to the results.Net profit for the period increased by 46% from last year to ₹1,018 crore. The growth in profitability was also due to a one-time gain of ₹202 crore, which was courtesy of a tax write-back. The new labour codes had an impact of ₹10 crore, while another ₹35 crore was due to a severance impact, resulting in a net gain of ₹158 crore.
Revenue for the quarter increased by 18.5% on a year-on-year basis to ₹5,667 crore, higher than the CNBC-TV18 poll of ₹5,260 crore. Revenue was the highest-ever in a quarter for Nestle India.
Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) for the quarter stood at ₹1,201 crore, up 9% from last year and in-line with the CNBC-TV18 poll of ₹1,202 crore.EBITDA margin narrowed by 200 basis points to 21.1% from 23.1% last year and also lower than the CNBC-TV18 poll of 23%. Margins narrowed due to increase in advertising spends, which increased by 42% from the year-ago period.

Confectionary was the fastest growing product group during the quarter, with double-digit growth led by strong underlying volume growth. Significant ad spends contributed to this growth, along with expansion of store presence and a wider range of products, rural market acceleration, premiumization and increased in in-home penetration aided by quick-commerce.

Nestle India’s out of home business also saw double-digit growth, along with the general trade segment. E-commerce continued to sustain its strong growth, supported by new product launches, improved platform availability and robust festive activations.

Shares of Nestle India are trading 3% higher after the results announcement at ₹1,330.5. The stock is up 20% in the last one year.