1. Event Update | FMCG
August 10, 2010
Nestle NEUTRAL
CMP Rs2,805
Target Price -
Nestle arranged its first analyst meet in CY2010 to discuss its 1HCY2010 Investment Period -
performance and future outlook. We present the key takeaways:
Stock Info
Strong volume growth, exports rebound: For 1HCY2010, Nestle registered Sector FMCG
robust top-line growth of 19% yoy driven by 17.9% yoy volume growth in Market Cap (Rs cr) 27,041
domestic business led by Maggi (26% yoy) and chocolates (25% yoy). Export
Beta 0.1
volumes grew 29% yoy driven by pick-up in sales to Russia (36% yoy growth
in 2QCY2010 - an anomaly due to advancement of shipments). 52 Week High / Low 3,300/2,082
Maggi continues ~20%+ growth rate, competition manageable: Prepared Avg. Daily Volume 23,418
dishes (Maggi) registered a strong ~26% yoy volume growth despite the high
Face Value (Rs) 10
base and rising competition (Horlick Foodles and Knorr Soupy Noodles) aided
by well-positioned variants (Maggi Atta and Maggi Pazzta) and strong focus BSE Sensex 18,220
on LUP and PPP strategy. Nifty 5,461
Input cost inflation and staggered price hikes hurt margins: During
Reuters Code NEST.BO
2QCY2010, overall raw material cost index for Nestle rose ~10% yoy driven
by 26% and 39% yoy rise in the prices of milk and wheat, while the palm oil Bloomberg Code NEST@IN
and green coffee prices declined ~17-18% yoy. Going ahead, management
expects good monsoons and improved collections at the Moga factory to help
control inflation in the milk prices, while correction in the sugar prices is likely Shareholding Pattern (%)
to reflect in yoy declines by 4QCY2010. However, rising prices of green
Promoters 61.9
coffee and palm oil, up 3% and 17% yoy respectively, post 2QCY2010 poses
a risk. MF / Banks / Indian Fls 11.1
Investments to rise, guides for aggressive capex: Driven by robust volume FII / NRIs /
10.9
growth, Nestle has guided for aggressive capex plans and has already OCBs
committed ~Rs360cr as of 1HCY2010 (~Rs70cr for 1HCY2009). We model Indian Public / Others 16.1
in ~Rs425cr capex for CY2010.
Outlook and Valuation: While we continue to like Nestlé’s long-term growth story
(best play on food processing theme in India), we believe that Nestlé’s premium Abs. (%) 3m 1yr 3yr
(100%) valuations to the Sensex (5yr average at ~80%) is at risk to negative Sensex 5.1 21.4 22.5
surprises, which could emerge from: 1) gross margin pressures due to rising input Nestle 0.9 29.1 127.5
costs, 2) competition in high-growth noodles category from HUL and GSKCHL,
and 3) up-tick in ad spends. Hence, we recommend Neutral view on the stock
(post weak 2QCY2010 result, Nestlé’s stock has corrected ~7%) with a fair value
of Rs2,804 (based on P/E multiple of 29x FY2012E earnings, and in line with its
5-year historical average valuations).
Key Financials
Y/E Dec (Rs cr) CY2009 CY2010 CY2011E CY2012E
Net Sales 4,324 5,129 6,077 7,080
% chg 23.4 18.6 18.5 16.5
Net Profit 534 655 768 932 Anand Shah
% chg 29.1 22.6 17.2 21.4 022 – 4040 3800 Ext: 334
EBITDA (%) 20.0 20.2 19.0 19.2 anand.shah@angeltrade.com
EPS (Rs) 55.4 67.9 79.6 96.7
P/E (x) 50.6 41.3 35.2 29.0 Chitrangda Kapur
022 – 4040 3800 Ext: 323
P/BV (x) 57.1 46.5 34.4 29.1
chitrangdar.kapur@angeltrade.com
RoE (%) 119.8 124.2 112.2 108.7
RoCE (%) 160.7 164.3 142.9 136.6
Sreekanth P.V.S
EV/Sales (x) 6.2 5.2 4.4 3.8 022 – 4040 3800 Ext: 331
EV/EBITDA (x) 31.1 26.0 23.3 19.7 sreekanth.s@angeltrade.com
Source: Company, Angel Research
Please refer to important disclosures at the end of this report 1

2. Nestle| Event Update
Top-line growth driven by volumes, price-led growth missing
For 1HCY2010, Nestle registered robust overall top-line growth of 19% yoy driven
largely by the 17.9% yoy volume growth in the domestic business and sharp rebound
in export volumes, which grew 29.3% yoy. However, price-led growth was clearly
missing (under ~1% yoy), as Nestle has taken only limited/staggered price increases
in the recent quarters to protect volume growth.
Exhibit 1: Strong domestic volumes, exports rebound Exhibit 2: ~25%+ yoy volume growth across categories
32.0 29.3 33.0 27.1 25.8 25.3
27.0 23.0
22.0 18.3 17.9
13.0 7.1 6.9
17.0
2.7 0.5
(%)
12.0 3.0
(%)
7.0
0.7 0.5 (7.0)
2.0
(3.0) (17.0) (13.6)
(0.7)
Total Domestic Net Exports Milk Products Beverages Prepared Chocolates
Sales Dishes
Volume growth Realisation growth Volume growth Realisation growth
Source: Company, Angel Research; Note: numbers for 1HCY2010 Source: Company, Angel Research
Exports rebound led on higher beverage exports to Russia
Beverage volumes grew sharply by 27.1% yoy driven by the steep rebound in export
volumes (beverages constituted ~70% of exports), which have picked up due to
higher sales to Russia (accounts for ~43% of exports). However, management
indicated that the 36% yoy growth in export sales in 2QCY2010 was an anomaly on
account of advancement of shipments and not likely to repeat.
Exhibit 3: Pick up in sales to Russia drives exports Exhibit 4: Beverages constitute ~70% of exports
America Africa Prepered
Chocolates
6% 8% South Asia Dishes
3%
27% Milk 7%
Asia-
Products
Ocenia
20%
9%
Europe
7%
Russia Beverages
43% 70%
Source: Company, Angel Research Source: Company, Angel Research
Growth in Maggi continues unabated, chocolates regain ground
Volume growth was strong across categories with three out of four categories
registering ~25%+ yoy growth. While milk products (contribute ~46% to sales)
registered steady 7% yoy volume growth, prepared dishes registered a strong ~26%
yoy volume growth despite the high base and rising competition (Horlick Foodles
from GSK Consumer and Knorr Soupy Noodles from HUL) aided by well-positioned
variants (Maggi Atta and Maggi Pazzta are doing well) and strong focus on low-unit
price (LUP) packs and popularly positioned products (PPP). Management has also
attributed the high growth in Maggi to higher penetration.
August 10, 2010 2

3. Nestle| Event Update
Exhibit 5: Milk products post steady growth Exhibit 6: Maggi set for another year of ~20%+ growth
18 16 35 30
16 30 25 26
13 23
14 12 25 20 22
12 10 18
20
10 8 8 15
7 7 7
(%)
(%)
8 6
5 5 6 10 5
6 4 4 3 3 3
3 5
4
2 -
- (5) (1)
CY06
CY07
CY08
CY09
1HCY10
CY10E
CY11E
CY06
CY07
CY08
CY09
1HCY10
CY10E
CY11E
Volume Growth Realisation Growth Volume Growth Realisation Growth
Source: Company, Angel Research Source: Company, Angel Research
Noodles market set for exciting times; Nestle well entrenched
Nestlé’s management believes the Rs1,150cr noodles market growing at ~20% per
annum is set for acceleration in demand given entry of new players driving higher ad
spends in the segment. Moreover, the focus in the category is clearly shifting towards
healthy snacking, which should help aid market expansion. We believe that Nestle is
well-entrenched to gain from this burgeoning demand environment given: 1) strong
brand equity of Maggi, 2) better distribution reach particularly in the rural areas via
the Rs5 price pack, 3) strong portfolio with healthy variants like Maggi Atta Noodles
and recently launched Multigrainz noodles, and 4) successful extension into related
categories like pasta through Maggi Pazzta.
Management to increase focus on chocolates and confectionaries
Chocolates registered robust ~25% yoy growth in volumes aided by market share
gains (100bp yoy, currently at ~25%) and better distribution reach (retail outlets
increased to 1.2mn from 1.05mn a year ago).
Exhibit 7: Beverages rebound led by higher exports Exhibit 8: Volume off-take in chocolates set to improve
30 27 30 25
20
20 25
14 14 20
11 11 20 18
8 16
10 4 4 14
0 15 12
10
(%)
(%)
- 10 6
6
(3) 2 4 3
(10) 5 1 2
(9) (7)
(14) -
(20)
CY06
CY07
CY08
CY09
1HCY10
CY10E
CY11E
CY06
CY07
CY08
CY09
1HCY10
CY10E
CY11E
Volume Growth Realisation Growth Volume Growth Realisation Growth
Source: Company, Angel Research Source: Company, Angel Research
Management highlighted its renewed focus on this category and shared some
forthcoming initiatives to drive growth:
Avoid head-on competition, focus on niche sub-segments: Over the years,
Nestle has developed strong positioning in two smaller sub-segments of
chocolates, viz. white and wafers. Nestle, being a distant second in chocolates to
Cadbury, has decided to avoid head-on competition and enhance focus on
products already registering strong growth.
August 10, 2010 3

4. Nestle| Event Update
Shift focus away from low-price points: While Nestlé’s low-price point SKUs at
Re1 and Rs2 have done exceedingly well in driving volumes, management has
now decided to shift focus towards higher price points of Rs5 and Rs10 to
improve margins. In line with this strategy, Nestle has launched several new
products, viz. MilkyBar at Rs5, Munch at Rs10 and 3-finger Kit-Kat at Rs10.
Focus to shift on a portfolio of brands, Bar One re-launched: Driven by higher
frequency of chocolate consumption and increasing experimentation with
different brands by consumers, Nestle has decided to increase its focus as a
portfolio of chocolate brands, viz. Kit-Kat, Munch, MilkyBar and Bar One. In line
with this strategy, Nestle has re-launched Bar One with a new formulation and
brand campaign (after a five-year gap).
Input cost inflation and staggered price hikes hurt margins
During 2QCY2010, Nestle’s overall raw material cost index increased ~10% yoy
driven by the 26%, 13%, 39% and 5% yoy rise in the prices of fresh milk, skimmed
milk powder, sugar and wheat respectively, while the prices of palm oil and green
coffee declined 18% and 17% yoy, respectively. Management’s strong focus on
maintaining high volume growth across categories leading to limited price hikes
(price-led growth in the last three quarters stood at 1%, 2% and 5%, respectively)
coupled with high input cost inflation led to a 263bp and 138bp yoy contraction in
gross margins during 1QCY2010 and 2QCY2010, respectively.
Exhibit 9: Milk constitutes ~42% of input costs Exhibit 10: Three quarters of gross margin contraction
16.0 300
Others Milk 14.0 200
24% 34%
12.0
10.0 100
(bp)
(%)
Sugar 8.0 -
7% 6.0 (100)
Skimmed 4.0
Milk (200)
2.0
Wheat Powder
- (300)
Flour 8%
1Q08
2Q08
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
9% Vegetable Green
Oil Coffee
8% 10% chg in gross margin (RHS) rise in cost index (LHS)
Source: Company, Angel Research Source: Company, Angel Research
Going ahead, management expects good monsoons and improved collections at its
Moga factory to help control inflation in the milk prices (key raw material accounting
for ~34% of input costs), while correction in the sugar prices is likely to reflect in yoy
declines by 4QCY2010. However, rising prices of green coffee and palm oil, up 3%
and 17% yoy respectively, post 2QCY2010 will negate any significant gains from
correction in other inputs. Moreover, management has indicated that it is willing to
compromise on near-term margins to maintain high volume growth and ensure
long-term profitability via staggered price hikes.
While we expect the quantum of input cost pressures for Nestle to reduce in
2HCY2010 driven by good monsoons and lower inflation in milk (milk prices remain
the key monitorable, we model in ~17% rise for CY2010) and sugar, we expect the
company’s raw material cost index to rise ~6-10% yoy in 2HCY2010 due to low
base and inflation in coffee and palm oil prices. Hence, we have modeled in a gross
margin contraction of 180bp yoy for CY2010 (200bp contraction in 1HCY2010).
August 10, 2010 4

5. Nestle| Event Update
Exhibit 11: Milk prices flat qoq, yoy inflation still high Exhibit 12: Milk powder down 2% qoq, up ~10% yoy
35 12 20 10
30 10 15
8 5
25 10
6
20 4 5
-
15 2 -
- (5)
10 (5)
(2)
5 (10)
(4)
- (6) (15) (10)
1Q08
2Q08
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
Current
1Q08
2Q08
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
QoQ % (RHS) YoY % (LHS) Current QoQ % (RHS) YoY % (LHS)
Source: Company, Angel Research Source: Company, Angel Research
Exhibit 13: Coffee prices down yoy, 21% spike qoq Exhibit 14: Sugar prices down ~8-10% qoq
40 25 80 30
30 20 25
60 20
20 15
15
10 40
10 10
5 5
- 20
- -
(10) (5) (5)
-
(20) (10) (10)
(20) (15)
(30) (15)
Current
1Q08
2Q08
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
1Q08
2Q08
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
Current
QoQ % (RHS) YoY % (LHS) QoQ % (RHS) YoY % (LHS)
Source: Company, Angel Research Source: Company, Angel Research
Exhibit 15: Wheat prices volatile, inflation continues Exhibit 16: Palm oil prices on the rise, spike 17% yoy
30 20 30 20
25 15 20 15
20 10 10 10
5 5
15 -
- -
10 (10)
(5) (5)
5 (20) (10)
(10)
- (15) (30) (15)
(5) (20) (40) (20)
Current
1Q08
2Q08
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
1Q08
2Q08
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
Current
QoQ % (RHS) YoY % (LHS) QoQ % (RHS) YoY % (LHS)
Source: Company, Angel Research Source: Company, Angel Research
August 10, 2010 5

6. Nestle| Event Update
Exhibit 17: Key Assumptions
#
Sales (Rs cr) CY2008 CY2009 CY2010E CY2011E CY09-11E
Total Milk Products 1,939 2,311 2,671 3,029 14.5
Beverages 801 804 897 1,064 15.0
Prepared Dishes & Cooking Aids 1,052 1,335 1,691 2,056 24.1
Chocolates & Confectionaries 680 772 954 1,109 19.9
Total Gross Revenue 4,471 5,222 6,214 7,258 17.9
YoY Growth (%)
Total Milk Products 23.1 19.2 15.6 13.4
Beverages 10.9 0.4 11.6 18.6
Prepared Dishes & Cooking Aids 34.7 26.9 26.7 21.5
Chocolates & Confectionaries 19.5 13.6 23.6 16.3
Total Gross Revenue 22.6 16.8 19.0 16.8
Volume Growth (%)
Total Milk Products 10.1 13.1 8.0 7.5
Beverages 0.0 (3.1) 20.0 14.0
Prepared Dishes & Cooking Aids 30.1 21.7 23.0 18.0
Chocolates & Confectionaries 12.4 9.7 20.0 14.0
Total Gross Revenue 16.9 14.9 16.8 13.6
Realisation Growth (%)
Total Milk Products 11.7 5.4 7.0 5.5
Beverages 10.9 3.6 (7.0) 4.0
Prepared Dishes & Cooking Aids 3.5 4.3 3.0 3.0
Chocolates & Confectionaries 6.3 3.5 3.0 2.0
Source: Company, Angel Research; Note: #denotes CAGR
August 10, 2010 6

7. Nestle| Event Update
Exhibit 18: Peer Valuation
Company Reco M-cap CMP TP* Upside P/E (x) EV/Sales (x) RoE (%) CAGR #
(Rs cr) (Rs) (Rs) (%) FY11E FY12E FY11E FY12E FY11E FY12E Sales PAT
Asian Paints Accumulate 25,591 2,668 2,773 3.9 28.1 24.1 3.2 2.7 40.8 37.8 17.5 17.4
Colgate Reduce 11,447 842 798 (5.2) 26.7 23.3 4.9 4.2 117.3 108.8 14.3 7.8
Dabur Reduce 17,478 203 195 (3.9) 31.1 26.0 4.3 3.7 39.9 39.1 17.4 16.0
GSKCHL Reduce 7,697 1,830 1,618 (11.6) 28.0 23.8 3.1 2.6 27.8 27.7 16.8 18.6
GCPL Accumulate 11,646 360 397 10.2 25.1 20.0 3.7 3.0 34.2 30.1 44.5 27.9
HUL Reduce 56,658 260 237 (8.9) 26.3 23.2 2.7 2.4 73.0 72.8 10.8 7.9
ITC Neutral 59,198 157 155 (1.5) 25.0 22.3 2.5 2.2 31.4 30.1 14.4 15.2
Marico Accumulate 7,238 119 124 4.4 25.1 21.1 2.4 2.1 37.3 33.0 16.1 19.3
Nestle Neutral 27,041 2,805 2,804 (0.0) 35.2 29.0 4.4 3.8 112.2 108.7 17.5 19.3
Source: Company, Angel Research, Note: # denotes CAGR for FY2010-12E, * In case of Neutral recommendation, TP = Fair value
Exhibit 19: Angel v/s Consensus estimates
Top-line (Rs cr) FY2011E FY2012E EPS (Rs) FY2011E FY2012E
Angel estimates 6,077 7,080 Angel estimates 79.6 96.7
Consensus 6,050 7,089 Consensus 82.9 99.5
Diff (%) 0.4 (0.1) Diff (%) (4.0) (2.9)
Source: Bloomberg, Angel Research
Exhibit 20: One-yr returns of Nestle v/s Sensex Exhibit 21: One-yr forward P/E band
150% 3,500 21x 25x 29x 33x
Sensex Nestle
140% 3,000
130% 2,500
Share Price (Rs)
120% 2,000
110% 1,500
100% 1,000
90% 500
-
80%
Oct-05
Oct-06
Oct-07
Oct-08
Oct-09
Apr-05
Apr-06
Apr-07
Apr-08
Apr-09
Apr-10
Jul-05
Jan-06
Jul-06
Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
Jul-09
Jan-10
Jul-10
Oct-09
Jan-10
Feb-10
Mar-10
May-10
Jun-10
Jul-10
Aug-09
Nov-09
Apr-10
Aug-10
Sep-09
Dec-09
Source: Company, Angel Research; Note: Returns indexed to 100 Source: Company, Angel Research
Exhibit 22: One-yr forward P/E chart Exhibit 23: One-yr forward Premium v/s Sensex chart
45.0 160%
40.0 140%
35.0 120%
30.0 100%
25.0 80%
20.0
60%
15.0
40%
10.0
5.0 20%
- 0%
Jan-03
Jan-10
Nov-03
Jun-03
Sep-04
Feb-05
Jul-05
Dec-05
May-06
Oct-06
Mar-07
Dec-07
May-08
Oct-08
Mar-09
Jun-10
Apr-02
Aug-02
Apr-04
Aug-07
Aug-09
Jan-03
Jun-03
Feb-05
Jul-05
May-06
Oct-06
Mar-07
May-08
Oct-08
Mar-09
Jan-10
Jun-10
Apr-02
Aug-02
Nov-03
Apr-04
Aug-07
Aug-09
Sep-04
Dec-05
Dec-07
Source: Company, Angel Research, Note: Blue-line indicates 5-year average Source: Company, Angel Research, Note: Blue-line indicates 5-year average
August 10, 2010 7

8. Nestle| Event Update
Profit & Loss Statement
Y/E Dec (Rs cr) CY06 CY07 CY08 CY09 CY10E CY11E
Gross sales 2,944 3,647 4,471 5,222 6,214 7,258
Less: Excise duty 128 143 147 93 137 178
Net Sales 2,816 3,504 4,324 5,129 6,077 7,080
Total operating income 2,816 3,504 4,324 5,129 6,077 7,080
% chg 13.7 24.4 23.4 18.6 18.5 16.5
Total Expenditure 2,275 2,808 3,461 4,095 4,924 5,719
Cost of Materials 1,320 1,685 2,104 2,448 3,007 3,510
Advertising Exp 149 172 194 268 346 418
Personnel 211 263 307 432 453 510
Others 594 688 855 947 1,118 1,282
EBITDA 542 696 864 1,034 1,153 1,362
% chg 3.7 28.6 24.1 19.8 11.4 18.1
(% of Net Sales) 19.2 19.9 20.0 20.2 19.0 19.2
Depreciation& Amortisation 66 75 92 111 130 146
EBIT 475 622 771 923 1,023 1,216
% chg 2.2 30.8 24.1 19.7 10.8 18.8
(% of Net Sales) 16.9 17.7 17.8 18.0 16.8 17.2
Interest & other Charges 0 1 2 1 1 1
Other Income 21 25 34 38 41 47
(% of PBT) 4.2 3.9 4.2 3.9 3.9 3.7
Share in profit of Associates 0 0 0 0 0 0
Recurring PBT 495 646 804 960 1,063 1,261
% chg 1.4 30.4 24.4 19.4 10.8 18.6
Extraordinary Expense/(Inc.) 15 18 31 43 19 20
PBT (reported) 481 629 773 917 1,044 1,241
Tax 165 215 239 262 276 309
(% of PBT) 33.4 33.2 29.7 27.3 26.0 24.5
PAT (reported) 315 414 534 655 768 932
Add: Share of associates 0 0 0 0 0 0
Less: Minority interest (MI) 0 0 0 0 0 0
PAT after MI (reported) 315 414 534 655 768 932
ADJ. PAT 330 431 565 698 787 952
% chg 0.2 30.7 31.0 23.5 12.8 21.0
(% of Net Sales) 11.7 12.3 13.1 13.6 12.9 13.4
Basic EPS (Rs) 32.7 42.9 55.4 67.9 79.6 96.7
Fully Diluted EPS (Rs) 32.7 42.9 55.4 67.9 79.6 96.7
% chg 1.8 31.3 29.1 22.6 17.2 21.4
August 10, 2010 8

9. Nestle| Event Update
Balance Sheet
Y/E Dec (Rs cr) CY06 CY07 CY08 CY09 CY10E CY11E
SOURCES OF FUNDS
Equity Share Capital 96 96 96 96 96 96
Preference Capital - - - - - -
Reserves& Surplus 292 322 377 485 690 833
Shareholders Funds 389 418 473 581 787 929
Minority Interest - - - - - -
Total Loans 16 3 - - - -
Deferred Tax Liability 19 29 37 32 32 32
Total Liabilities 424 450 510 613 819 961
APPLICATION OF FUNDS
Gross Block 1,058 1,180 1,405 1,641 2,026 2,284
Less: Acc. Depreciation 516 578 652 745 874 1,020
Net Block 542 602 753 896 1,151 1,264
Capital Work-in-Progress 38 74 109 80 122 114
Goodwill - - - - - -
Investments 78 94 35 203 228 253
Current Assets 535 638 798 857 963 1,212
Cash 76 38 194 156 138 269
Loans & Advances 127 145 124 138 158 177
Other 332 455 481 563 667 766
Current liabilities 769 958 1,185 1,422 1,646 1,882
Net Current Assets (234) (320) (387) (566) (683) (670)
Misc Exp. not written off - - - - - -
Total Assets 424 450 510 613 819 961
Cash Flow Statement
Y/E Dec (Rs cr) CY06 CY07 CY08 CY09 CY10E CY11E
Profit before tax 481 629 773 917 1,044 1,241
Depreciation 66 75 92 111 130 146
Change in Working Cap 18 8 84 131 129 95
Interest / Dividend (Net) (5) (4) (13) (13) (15) (17)
Direct taxes paid 165 215 239 262 276 309
Others 21 22 21 (14) 56 23
Cash Flow from Operations 416 514 719 871 1,068 1,179
Inc./ (Dec.) in Fixed Assets (124) (157) (261) (206) (427) (251)
Inc./ (Dec.) in Investments 27 (17) 60 (168) (25) (25)
Cash Flow from Investing (98) (174) (201) (375) (452) (276)
Issue of Equity - - - - - -
Inc./(Dec.) in loans 2 (13) (3) - - -
Dividend Paid (Incl. Tax) 285 370 372 547 649 790
Interest / Dividend (Net) (5) (4) (13) (13) (15) (17)
Cash Flow from Financing (279) (379) (362) (534) (634) (773)
Inc./(Dec.) in Cash 40 (39) 156 (38) (18) 131
Opening Cash balances 37 76 38 194 156 138
Closing Cash balances 76 38 194 156 138 269
August 10, 2010 9

10. Nestle| Event Update
Key Ratios
Y/E Dec CY06 CY07 CY08 CY09 CY10E CY11E
Valuation Ratio (x)
P/E (on FDEPS) 85.8 65.3 50.6 41.3 35.2 29.0
P/CEPS 70.9 55.3 43.2 35.3 30.1 25.1
P/BV 69.5 64.6 57.1 46.5 34.4 29.1
Dividend yield (%) 0.9 1.2 1.5 1.7 2.1 2.5
EV/Sales 9.6 7.7 6.2 5.2 4.4 3.8
EV/EBITDA 49.8 38.8 31.1 26.0 23.3 19.7
EV / Total Assets 63.6 60.0 52.6 43.8 32.9 27.9
Per Share Data (Rs)
EPS (Basic) 32.7 42.9 55.4 67.9 79.6 96.7
EPS (fully diluted) 32.7 42.9 55.4 67.9 79.6 96.7
Cash EPS 39.6 50.7 65.0 79.5 93.1 111.8
DPS 25.5 33.0 42.5 48.5 57.5 70.0
Book Value 40.3 43.4 49.1 60.3 81.6 96.4
Returns (%)
RoCE 118.4 142.2 160.7 164.3 142.9 136.6
Angel RoIC (Pre-tax) 124.7 141.1 180.9 250.4 214.3 205.9
RoE 84.8 102.5 119.8 124.2 112.2 108.7
Turnover ratios (x)
Asset Turnover 2.7 3.0 3.1 3.1 3.0 3.1
Inventory / Sales (days) 35.8 41.8 36.7 35.5 35.3 34.4
Receivables (days) 7.2 5.6 3.8 4.6 4.8 5.1
Payables (days) 48.0 47.9 42.8 41.8 41.8 41.6
Net working capital (days) (9.1) (9.8) (7.4) (7.1) (7.4) (7.5)
August 10, 2010 10

11. Nestle| Event Update
Research Team Tel: 022 - 4040 3800 E-mail: Research@angeltrade.com Website: www.angeltrade.com
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Disclosure of Interest Statement Nestle
1. Analyst ownership of the stock No
2. Angel and its Group companies ownership of the stock No
3. Angel and its Group companies' Directors ownership of the stock No
4. Broking relationship with company covered No
Note: We have not considered any Exposure below Rs 1 lakh for Angel, its Group companies and Directors.
Ratings (Returns) : Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%)
Reduce (-5% to 15%) Sell (< -15%)
August 10, 2010 11

12. Nestle| Event Update
Address: Acme Plaza, ‘A’ Wing, 3rd Floor, M.V. Road, Opp. Sangam Cinema, Andheri (E), Mumbai - 400 059.
Tel: (022) 3952 4568 / 4040 3800
Research Team
Fundamental:
Sarabjit Kour Nangra VP-Research, Pharmaceutical sarabjit@angeltrade.com
Vaibhav Agrawal VP-Research, Banking vaibhav.agrawal@angeltrade.com
Vaishali Jajoo Automobile vaishali.jajoo@angeltrade.com
Shailesh Kanani Infrastructure, Real Estate shailesh.kanani@angeltrade.com
Anand Shah FMCG, Media anand.shah@angeltrade.com
Deepak Pareek Oil & Gas deepak.pareek@angeltrade.com
Sushant Dalmia Pharmaceutical sushant.dalmia@angeltrade.com
Rupesh Sankhe Cement, Power rupeshd.sankhe@angeltrade.com
Param Desai Real Estate, Logistics, Shipping paramv.desai@angeltrade.com
Sageraj Bariya Fertiliser, Mid-cap sageraj.bariya@angeltrade.com
Viraj Nadkarni Retail, Hotels, Mid-cap virajm.nadkarni@angeltrade.com
Paresh Jain Metals & Mining pareshn.jain@angeltrade.com
Amit Rane Banking amitn.rane@angeltrade.com
Jai Sharda Mid-cap jai.sharda@angeltrade.com
Sharan Lillaney Mid-cap sharanb.lillaney@angeltrade.com
Amit Vora Research Associate (Oil & Gas) amit.vora@angeltrade.com
V Srinivasan Research Associate (Cement, Power) v.srinivasan@angeltrade.com
Aniruddha Mate Research Associate (Infra, Real Estate) aniruddha.mate@angeltrade.com
Mihir Salot Research Associate (Logistics, Shipping) mihirr.salot@angeltrade.com
Chitrangda Kapur Research Associate (FMCG, Media) chitrangdar.kapur@angeltrade.com
Vibha Salvi Research Associate (IT, Telecom) vibhas.salvi@angeltrade.com
Pooja Jain Research Associate (Metals & Mining) pooja.j@angeltrade.com
Technicals:
Shardul Kulkarni Sr. Technical Analyst shardul.kulkarni@angeltrade.com
Mileen Vasudeo Technical Analyst vasudeo.kamalakant@angeltrade.com
Derivatives:
Siddarth Bhamre Head - Derivatives siddarth.bhamre@angeltrade.com
Jaya Agarwal Derivative Analyst jaya.agarwal@angeltrade.com
Institutional Sales Team:
Mayuresh Joshi VP - Institutional Sales mayuresh.joshi@angeltrade.com
Abhimanyu Sofat AVP - Institutional Sales abhimanyu.sofat@angeltrade.com
Nitesh Jalan Sr. Manager niteshk.jalan@angeltrade.com
Pranav Modi Sr. Manager pranavs.modi@angeltrade.com
Sandeep Jangir Sr. Manager sandeepp.jangir@angeltrade.com
Ganesh Iyer Sr. Manager ganeshb.Iyer@angeltrade.com
Jay Harsora Sr. Dealer jayr.harsora@angeltrade.com
Meenakshi Chavan Dealer meenakshis.chavan@angeltrade.com
Gaurang Tisani Dealer gaurangp.tisani@angeltrade.com
Production Team:
Bharathi Shetty Research Editor bharathi.shetty@angeltrade.com
Simran Kaur Research Editor simran.kaur@angeltrade.com
Bharat Patil Production bharat.patil@angeltrade.com
Dilip Patel Production dilipm.patel@angeltrade.com
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Angel Capital & Debt Market Ltd: INB 231279838 / NSE FNO: INF 231279838 / NSE Member code -12798 Angel Commodities Broking (P) Ltd: MCX Member ID: 12685 / FMC Regn No: MCX / TCM / CORP / 0037 NCDEX : Member ID 00220 / FMC Regn No: NCDEX / TCM / CORP / 0302
August 10, 2010 12