Can Maggi noodles help Nestle India's post a better Q1 profit?

Nestle India will announce its first quarter ended March 31, 2017 result on Friday May 12, 2017.

Nestle India follows the calendar year and not the fiscal year. 

Two things that were the biggest problems for Nestle India during CY16 were Maggi noodles issue and demonetisation. 

Demonetisation led to impact of Rs 100 crore in Nestle's Maggi volume growth by end of December 2016.

In the last quarter of CY16, Nestle reported 8.66% drop in its standalone net profit to Rs 167.31 crore against Rs 183.19 crore during the similar period of the previous year.

At the same time, standalone net sales stood at Rs 2,261.28 crore, which grew by 16.17% from Rs 1,946.44 crore – a year ago same period.

However, currently market share of Maggi noodles has improved to 65% from market share of 47% during note ban.

Considering this improvement, will Nestle India shine in Q1 quarter?

Abneesh Roy, Tanmay Sharma and Alok Shah analysts at Edelweiss Financial Services said, “Demonetisation led to impact of INR1bn during Q4CY16 and we beleive that impact will recede in Q1CY17 significantly. Owing to the Maggi issue in the base, Nestle will see better growth rate and we expect revenue growth of ~12% YoY in Q1CY17 on base of dip of 8.7% YoY."

The trio added, "Nestle has done more than 30 new launches and is running advertisements to promote product along with some raw material inflation (milk prices - though have taken price increase) can keep the margins contained."

While analysts at KRChoksey said, "Nestle India Q1CY17 will post revenue growth of 14.2% yoy and 15.0% qoq because of recovery in its market share of noddles category. Other business are showing growth with launching of new products in urban areas."

Recently, Nestle introduced four new Maggi flavours namely  Amritsari Achari, Mumbaiya Chatak, Super Chennai and Bengali Jhaal – all crafted using signature herbs and spices used in various regional cuisines of India.

On other hand Motilal Oswal expects net sales to grow by 20% yoy at Rs 2,750 crore mainly owing to some impact issue in the base. 

KRChoksey  expects EBIDTA  (operating profit) and PAT (profit after tax) margins to be around 24.3% yoy  and 12.5% yoy respectively. Similar expectations were from Motilal Oswal. 

Overall Edelweiss expects Nestle's net profit to be at Rs 2,995 crore, rising by 15.63% yoy and 11.17% qoq. Net sales is seen at Rs 25,705 crore, increasing by 11.63% yoy and 8.75% qoq.