ISLAMABAD: Nestle Pakistan Limited’s three-month financial summary showcases a positive growth trend in various key performance indicators. The company’s sales for the three months ending on March 31, 2023, amounted to Rs49.59 billion, marking a significant increase of 31% compared to the same period the previous year when sales were Rs37.78 billion.
The growth in sales directly impacted the gross profit, which rose by 31% as well, reaching Rs16.59 billion in 3MCY23, compared to Rs12.67 billion in 3MCY22. This indicates that Nestle Pakistan effectively has managed its cost of goods sold and improved its pricing strategy.
The operating profit for the three-month period also experienced substantial growth, increasing by 45% from Rs7.50 billion in 3MCY22 to Rs10.87 billion in 3MCY23. This improvement suggests that Nestle Pakistan has successfully controlled its operating expenses and enhanced its operational efficiency.
Despite an increase in finance costs by 2%, reaching Rs613 million in 3MCY23, the overall financial performance of the company remained robust. The company’s ability to generate additional income from other sources, such as investments or non-operating activities, significantly improved, with other income increasing by an impressive 226% to Rs87.65 million in 3MCY23 compared to Rs26.92 million in 3MCY22.
Considering these factors, Nestle Pakistan achieved a profit-before-tax of Rs8.30 billion in 3MCY23, representing a growth rate of 32% compared to Rs6.30 billion in 3MCY22.
After accounting for taxes, the company reported a profit-after-tax of Rs5.66 billion, showing a 27% increase from Rs4.45 billion in 3MCY22.
The earnings per share (EPS) for the three months were recorded at Rs124.85, reflecting a growth rate of 27% compared to Rs98.18 in 3MCY22. This increase indicates that Nestle Pakistan effectively utilised its profits to benefit shareholders.
Overall, Nestle Pakistan’s three-month financial summary demonstrates robust performance, with substantial growth in sales, gross profit, operating profit, and profit after tax.
These results indicate effective strategic management and a favourable market position for Nestle Pakistan in the specified period. The ratio analysis provides valuable insights into Nestle Pakistan’s financial performance over the years, highlighting key indicators such as gross profit margin, net profit margin, EPS growth, and the price/earnings growth (PEG) ratio.
The gross profit margin measures the percentage of revenue retained after deducting the cost of goods sold. Nestle Pakistan has consistently improved its gross profit margin over the years, reflecting better cost management and pricing strategies. The significant increase from 1.10% in FY20 to 6.57% in FY22 indicates improved profitability and operational efficiency.
The net profit margin measures the percentage of revenue retained after accounting for all expenses. Nestle Pakistan witnessed a positive trend in net profit margin, indicating effective cost control and improved profitability. Despite a negative net profit margin in FY20, the company managed to turn it around and achieve a positive net profit margin of 3.52% in FY22, showcasing strong financial performance.
The EPS growth represents the percentage increase in earnings per share over a specific period. Nestle Pakistan demonstrated exceptional growth in EPS over the years, indicating enhanced profitability and efficient utilisation of resources. The negative growth in FY20 reflects a challenging period, but the subsequent years witnessed substantial improvements, with FY21 and FY22 showing remarkable growth rates of 550.76% and 195.89%, respectively.
The PEG ratio assesses the relationship between a company’s price-to-earnings ratio (P/E ratio) and its EPS growth rate. A PEG ratio below 1 is generally considered favourable, indicating that the stock is undervalued relative to its growth prospects. Nestle Pakistan’s consistently low PEG ratios across the years suggest that the market price of the company’s shares has been in line with its EPS growth rate, indicating reasonable valuation.
Share Price Analysis
During the analysed period, Nestle Pakistan’s share price exhibited a range-bound and volatile behaviour. The price fluctuated between Rs5,000 and Rs5,850, with no clear upward or downward trend evident. The share price encountered resistance near the Rs5,850 level on two occasions, leading to reversals. On the other hand, it found support around the Rs5,000 to Rs5,100 range, rebounding from those levels multiple times. From mid-January to mid-February, the share price consolidated within a relatively stable range of Rs5,200 to Rs5,400.
About the company
Nestlé Pakistan is a public limited company incorporated in Pakistan under the repealed Companies Ordinance 1984 (now Companies Act 2017). The company is a subsidiary of Nestlé S.A, a Swiss-based public limited company.
The firm is principally engaged in the manufacturing, processing and sale of dairy products, besides beverages and imported products. –INP
