NESTLE LANKA [NEST: LKR1,200.0]
‘Exchange losses, the core battlefield for NEST as it retrieves LKR1.2 bn for 1H2012 (down 1.1% YoY) with 2Q2012 infusing 63% of YTD performance’
Excerpts of the attached:
Earnings Talk :
Despite a 21.7% YoY growth in NEST’s bottom line for 2Q2012, cumulative earnings for 2012 remained flat at LKR1,245.99 mn with a 1.1% decline YoY. YTD performance was hampered by the foreign currency transactions in 1Q2012 when the USD took the sharpest climb of 12.5% against the rupee. However, NEST continued to see its ordinary course of business moving smoothly with improving and or maintaining profit margins
Analyst Talk :
We downgrade our forecasts on a conservative note to LKR2,758.5 for 2012E whilst 2013E is expected to make LKR377.86 mn. Our downgrade of forecast for 2012E has been led by NEST’s poor performance in 1Q2012. Our expectations for 2012E stands with a marginal 4.8% YoY growth at LKR2,758.0. With the overall potential outlay for the fast moving consumer goods and with the company’s capacity expansion plans at their Kurunegala factory, we forecast NEST to record a 26.8% YoY growth in 2013E earnings and reach LKR3,497.3 mn.
NEST, priced on the high side. The share trades at quite a premium plateau, at 23.4X projected 2012E net profit and 20.5X forecasted 2013E earnings. Its defensive appeal define its premium rate as the share price could be least expected to trend down but would instead stagnate at current levels with minor swings..