Nestle India is one the biggest FMCG (Fastest moving consumer goods) companies in India. Nestle has a remarkable presence in milk & nutrition beverages, cooking aids and confectionery segments. It was founded in 1866 by Henri Nestle. The company survived the Plague disease crisis, World War II (WWII) and the corona pandemic. Nestle manufactures popular products under the brand names such as Maggi (Quick Noodles), Nescafe (Coffee), Milky bar Milo, Kit kat, Milkmaid and Nestea. The company is also manufactured products that are used on daily basis like Nestle Milk, Nestle Slim Milk, Fresh and Natural Curd and Jeera Raita.
The company is the subsidiary of Nestle S.A. Which is a Switzerland based company. Nestle has a presence pan India with 8 manufacturing facilities. The company has four branch offices in Delhi, Mumbai, Chennai and Kolkata. Also, they have a head office located in Gurugram, Haryana. Let’s analyse the company with the SWOT technique.
Nestle produces more than 8000 products. Which is includes every category such as coffee, mineral water, breakfast cereal, soups and sauces, etc… The company’s ROE is 106%. which is continuously increasing. The Return on Equity is representing that company is generating more return on investors money. The company marks 19% compounded profit growth and 10% compounded sales growth from the past 3 years. Nestle has a negative cash conversion cycle ratio. Which is good for any FMCG company. Also, company promoters hold 62.76% shares and promoters did not pledge any shares.
In 2014 Nestle Maggi was banned by food safety regulators from the Barabanki district of Uttar Pradesh reported that samples of Maggi Noodles had high levels of monosodium glutamate (MSG) apart from high lead content above the permissible level. This incident makes a dent in Nestle’s reputation in India. But the company again launch their Maggi Noodles and Nestle tries to aware people of product quality. Apart from that company recently accept that 90% of their products are not good for health and in their annual report.
Nestle reduced debt in the last couple of years. Now, the company is almost debt-free. Nestle delivered almost 18.65% CAGR (Compound annual growth rate) profit growth over the last 5 Years. The company’s ROE (Return on Equity) track record is very good. They delivered 65.08% ROE in the last 3 years. The company try to make a strong presence in an unorganized market. Also, they are introducing new products. The outcome we can observe is the company’s sales growth and revenue growth.
Nestle stock PE Ratio is higher than the industry PE ratio. As of 12 Jan 2022 Industry PE ratio is 60.2 where Stock PE is 84.7 which is higher than Industry PE. Because of the competition food companies are not able to be unique from their competitors. Also, they have a threat to their brand image because of the fake products. Because of the commodity products price hike company’s profit margins are decreasing.
Nestle’s net profit grows from 1,225 crores to 2,242 crores in Dec 2019 to Dec 2021 respectively. It means Company’s profit increased at the rate of 19%. The company shows sales growth from 10,010 crores to 14,403 crores in Dec 2019 to Dec 2021 respectively. It means Company’s profit increased at the rate of 10%.