Nestle India Ltd. share price target

We initiate coverage on Nestle with a BUY for a price target of Rs 20,944 (65.8x CY23 earnings) over the next 18-24 months representing a potential upside of 24.2% on the CMP of Rs 16,867. We have used the DCF method to value Nestle.

However, in light of emerging RM headwinds (packaging material and commodities like palm oil), we tweak our estimates a shade resulting in a downgrade to HOLD from BUY earlier. However, we maintain a TP of Rs 18,600 as we continue to value the stock at 60x its CY22E EPS.

Nestle India Q1 Results: Net Profit Up 15% on Higher Domestic Sales Nestle India's quarterly profit and revenue rose on the back of double-digit domestic sales growth in the quarter-ended March. Net profit of the maker of Maggi instant noodles and Nescafe coffeewhich follows the calendar year as its financial yearrose 15% over the preceding year to Rs 602.2 crore in the three months March. Total Sales increased by 8.9%. Domestic Sales increased by 10.2% driven by volume & mix and is broad based. Export Sales were lower by 12.9% due to lower exports to affiliates. Demand in...

Nestle India (NEST) 1QCY21 reported in-line result driven by strong double digit growth momentum in domestic business (3rd consecutive quarter) while revenue from exports continues to decline. Key brands like Maggi noodles, Kitkat, Nescafe classic, Maggi Sauce, Milkmaid, Maggi Masala Magic grew by double digits during the quarter driven by higher in-home consumption. Revenue from e-commerce grew 66%YoY. Gross margin expanded for 3rd consecutive quarter however, management highlights inflation in the cost of raw material to be key challenge going forward. Dividend announcement of Rs 25/share is positive. We have marginally trimmed our other income estimates for...

NIL has been able to grow at a consistent pace in the last four years. However, volume growth has moderated to 2.6% in CY20. We believe certain supply constraints during peak of the pandemic and relatively smaller presence in rural regions impacted growth last year. However, we believe the company is well placed to capture the growth now with increasing rural presence and capacity addition in existing categories. We believe NIL would be able to maintain dividend-payout of ~80%. The stock is trading at premium valuation multiples at 67x CY21E & 60x CY22E. We...

NEST delivered an in line set of 1QCY21 numbers, with overall sales growth of 8.6% (v/s our estimate of 8.5%) and domestic sales increasing in doubledigits (10.2%). While gross margin was in line, EBITDA and PAT were 5.2% and 3% ahead of our estimates, respectively. The management did call out sequential inflation in commodity costs, which may affect operating margin ahead. While longer term opportunities are attractive, valuations of 59x CY22E EPS are expensive. We maintain our Neutral rating....

Nestl posted a strong set of numbers backed by double digit growth across key brands and improving Out of home demand. Fresh set of Lockdowns across the nation on account of increased Covid cases will increase pantry...

Moderating in-home consumption should benefit key segments while complete revival of Out-of-home consumption is expected to propel topline further in the near term. Hence, we upgrade our rating on the...

Continued thrust on new category, product launches The company continued its thrust on new launches & foray in subcategories. New launches are contributing 3-4% of total sales. Moreover, ecom channels' contribution has more than doubled in CY20 at 3.7% to total sales. NIL has been aggressive in terms of new launches in the last five years with introduction of more than 70 new products, variants. It forayed into breakfast cereals poha, upma in last two years that have grown faster in CY20. It has also been raising its marketing spend to support these brands. With higher consumption in rural areas, smaller towns, it is increasing its rural penetration by introducing smaller SKUs across segments. We...