Nestle Nigeria Plc., recently released its FY2014 result posting another impressive year on year (YoY) result despite stiff competition and austere economic environment. FY2014 revenue rose by 7.70% YoY (NGN143.33bn vs. FY2013: NGN133.08bn).
Analysing the result QoQ, the company actually recorded a fourth quarter revenue of NGN40.66bn relative to third quarter figure of NGN35.46bn implying an impressive growth of 14.66% (vs 14.24% growth in the previous period in 2013).
Major cost line items had a mixed performance as Cost to sales ratio moderated marginally by 0.05% YoY to 57.28% as against the previous level of 57.33% in 2013, OPEX margin hiked by 22.35% (vs. FY2013: 21.76%) while finance cost jumped 147.16% accounting for 21.70% of Profit before tax (vs. 8.24% in 2013).
Expectedly, earnings after tax declined slightly by 0.10%. Using a blend of absolute and relative valuation, we arrived at a revised target price of NGN1, 006.04 for NESTLE, a 0.55% upward revision from our previous TP of NGN1000.54 and a 20% potential upside to the current price of NGN839.00 and hence, our “BUY” rating.