Sell

We maintain REDUCE, lowering our Jun-26E TP by 6% to Rs5,500, based on 48x P/E (revised from 50x, now aligned with the 5Y average forward P/E). Q1 results were in line, adjusting for the Phantom Stock Option Scheme expenses.

We retain REDUCE on Britannia with unchanged Mar-26E TP of Rs5,500, on 48x P/E (in line with its last 5Y forward average P/E). With improvement in macro trends, the management is reasonably optimistic about the sector recovery.

We retain REDUCE on Nestlé India and Mar-26E TP of Rs2,300, on 60x P/E. We see demand stress persisting in a major part of the portfolio, with demand for milk products continuing to see impact of healthy price hikes (amid inflation) and competitive pressure in prepared dishes.

Compared to consensus, there was a beat on sales at 1% and on EBITDA at 6%. EBITDA beat on lower SG&A as a % of sales

PSL reported modest results in 2QFY25, impacted by inflationary pressures. Significant inflation in palm oil, coupled with increased duties in September, is anticipated to negatively impact 3Q FY25.

We downgrade Britannia to REDUCE from Add, cutting Sep-25E TP to Rs5,200 from Rs6,750 earlier.

We downgrade Nestlé India to REDUCE from Add with a 14.3% cut in TP to Rs2,400 amid sustained topline pressures.

Our REDUCE call on Nestlé is a factor of valuations (62x P/E for FY26) pricingin the positive outlook. Capacity augmentation (Rs64bn capex spends over
CY20-25), a wider parent portfolio (gaining relevance in the Indian context),
and thrust on rural, all bolster the fundamentals

We are cutting CY20-23 EPS estimates of Nestle by 3.2% to 4.2% on disappointing performance in 2Q20. Although Nestle posted positive sales growth of 2.6% despite setback in vending business, constraints in production and distribution limited gains in a very strong quarter for food essentials. We were also surprised at GM pressure given benign prices of...

Gross margins pressure to abate given sharp decline in commodities Nestle has sustained strong sales momentum given strong show by Maggi and Chocolates and also pantry stocking in key categories. Our channel checks suggest sustained growth in 2Q21 also given that lockdown is forcing consumers to undertake pantry stocking in Maggi, tetrapack Milk, Coffee and Dairy whitener in particular. Our sales mix analysis suggested that Nestle is...

We cut our CY20 and CY21 EPS by 5.4% and 4.7% and maintain Reduce rating on Nestle given that it represents a classic confluence of life time high PE multiples and EBIDTA margins in a scenario of rising input costs with an estimated 10% PAT CAGR over CY19-21. Although NESTLE has been able to report a strong 10% domestic sales growth in a tepid demand scenario, it has...

Venky's stock has now run up 216% since we initiated coverage (July, 2017) on the stock. In the last three months, the stock has appreciated 85%, as strong earnings performance in recent quarters has led to better perception among investors, aiding a re-rating. In our last update (March, 2018), we had noted signs of weakening poultry prices. Over the last month, decline in poultry prices has been sharper (more than 20% decline y/y), which is likely to affect near-term performance of the stock negatively. Moreover, industry sources indicate that there may be an excess supply in...

Nestl India has posted 8.7% YoY rise in net sales to Rs24.8bn in 1QCY17 with domestic business growing by 9.4% and exports remaining flat on YoY basis. EBITDA declined by 5.5% YoY to Rs5.2bn, while net profit grew by 6.8% YoY to Rs3.1bn. We expect Nestl to post 12.8% and 12.2% CAGR in revenue and earnings, respectively through CY16-18. However, as valuations continue to remain highly prohibitive at 44.4x CY18E earnings, we maintain our REDUCE recommendation on the stock with a revised Target Price of Rs5,551 (from Rs5,647 earlier). Domestic Biz Spurs Growth, but Margins Remain Under Pressure As per the management, growth in domestic business was led by increased volume across...

Benefiting from lower base effect, Nestl India has reported 16.2% YoY growth in revenue to Rs22.6bn in 4QCY16. Its domestic sales increased by 17% YoY, while exports sales registered 8% YoY growth. Despite 12.2% YoY rise in EBITDA to Rs3.8bn, net profit fell by 8.7% YoY to Rs1.7bn primarily due to provisions for contingencies of Rs810mn. Though we expect Nestl to report revenue and earnings CAGR of 12.8% and 12.2%, respectively through CY16-18E, valuations at 41.8x CY18E earnings appear stretched in our view. Hence, we maintain our REDUCE recommendation on the stock with a...

Nestl India's net sales, EBITDA and net profit surged by 35% yoy, 67% yoy & 116% yoy to Rs23.5bn, Rs4.5bn & Rs2.7bn, respectively in 3QCY16. This growth is largely attributable to lower base effect due to ban on Maggi in the previous year, while growth excluding Maggi is likely to be in lower single digit. While we expect Nestl to see 14.9% & 17.8% CAGR in revenue and earnings through CY16-18E, the valuations at 41.7x CY18E earnings are prohibitive, in our view. As we believe that there are better opportunities in the FMCG space at inexpensive valuations, we maintain our REDUCE...

Nestle India Limited - NESTLEIND recently attended Nestle India’s analyst meet. The company is in a transitional phase of achieving its lost sales by launching new products and rejuvenating its existing portfolio. While it has managed to execute very well in a highly challenging environment marked by sluggish market conditions, most of the easy gains have already come through. Its growth path from here is rather challenging, but the consensus estimates paint an overly optimistic scenario. We continue to believe that chances of earnings downgrades remain high and maintain our Sell recommendation.

Valuation: Phillip Capital raise their target multiple to 40x our CY17 earnings, translating into a target price of Rs 5,900 (Rs 5450 earlier). Considering the significant downside, maintain Sell recommendation.

Its Management stated that Maggi has regained market leadership in instant noodles segment with market share of 57% after its reintroduction in November 2015, which is still far below the peak of ~80% market share it used to enjoy in instant noodles segment before the crisis. The Company has launched 25 new products during last two months to garner growth opportunities across categories including Greek yogurt brand Grekyo,...

While quarterly numbers can be volatile and Maggi sales are likely to have beaten estimates but it can now be ascertained that Maggi relaunch has been successful. Gross margins fell vs. Q1CY15/Q4CY15 due to rise in input prices...

Revenue growth was significantly below our and consensus estimates. Domestic sales fell by 24% yoy inspite of launch of Maggi noodles on 9th November. We believe that the decline was because of loss of shelf space by Maggi noodles to...