* NEST reported a 2%/5%/11% growth in revenue/EBITDA/PAT with a 3% domestic sales growth and a 9% decline in export sales.
* Factories operated at 75% utilization on an average with Rs 286mn incremental COVID related costs in addition to higher incentives offered to the limited available manpower further impacting profitability.
* Indicative domestic volume growth of 2% led by strong performance of dairy, coffee and noodles portfolio which faced initial supply constraints.
* EBITDA margins improved 80bps yoy to 24.5% despite milk‐price led 200bps compression in gross margin and higher COVID spends led by lower marketing spends and other overheads.
* E‐commerce channel (3.6% of sales) grew 122% yoy while Out of Home consumption channels witnessed a sharp decline.
* While margins are clearly above estimates, revenue growth fell short of expectations given the supply disruptions which have now normalized.
* We reiterate our ADD rating on the stock as it provides high growth resilience in the current environment due to the nature of its portfolio and strong pedigree and distribution strength.
* We maintain our price target at Rs 18,157 based on 60x CY22E earnings.
* We maintain our estimates as we believe a 11%/14% revenue/PAT CAGR over CY19‐22E remains achievable despite near‐term hiccups.
* NEST is currently trading at 65x/56x CY21/22E earnings
Divergence from Consensus
Our earnings estimates are unchanged, remaining 3% and 1% below consensus estimates for CY21/22 respectively.
Risk To Our Call
* Further unexpected disruptions in manufacturing or supply chain
* Sharp inflation in key raw materials impacting margins adversely
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