Nestle India Ltd. share price target

ICICI Securities Ltd | Retail Equity Research Nestl India (NIL) reported a healthy set of numbers with revenue inline with estimates. The company has adopted Ind-As from January 1, 2017. Hence, our estimates are not comparable for line items. Sales for the quarter was up 9.1% YoY to | 2575.7 crore (I-direct estimate: | 2566.2 crore) led by 9.7% domestic sales growth. The company reported volume growth across categories and has benefited from the price hike taken in previous quarters Raw material cost as a percentage of net sales has increased 315 bps...

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...

Accelerating the Game in India; Building the Base for Another100 Years Nestle India recorded a YoY decline of 8.7% in its net profit from Rs. 1832 Mn inQ4CY15 to Rs. 1673 Mn for Q4CY16, hit by higher tax expense and demonetization that impacted its domestic sales. However, net sales of the company for Q4CY16 were up 16.7% to Rs. 22862 Mn as against Rs. 19595 Mn in the correspondingquarter last fiscal on a base impacted by Maggi noodles issue.

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...

ICICI Securities Ltd | Retail Equity Research Nestl India (NIL) reported a healthy set of numbers. Revenue, operating profit were marginally better-than-estimates amid a difficult demand environment due to demonetisation. Revenue grew 16.2% YoY to | 2261.3 crore (I-direct estimate: | 2208.7 crore) on a low base (lower contribution from Maggi post its re-launch). However, it was down 3.6% sequentially. NIL successfully gained market share in the quarter for the Maggi portfolio reaching 60% vs. 57% in Q3CY16...

Proliferating Product Basket Supporting Topline Growth: Nestle India Ltd registered a strong top-line growth of 35.6%YoY at Rs.23635Mn in Q3CY16 as compared to Rs. 17424Mn in Q3CY15 on the back of re-launch of Maggi noodles, new product launches and aggressive product distribution.EBITDA increased by 65.0% YoY to Rs. 4752Mn in Q3CY16 against Rs. 2879Mn in Q3CY15 supported by lower operating expenses to sales ratio while EBITDA margins increased by 358bps YoY to 20.1% in Q3CY16 from 16.5% in Q3CY15.

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...

ICICI Securities Ltd | Retail Equity Research Net sales grew 35.1% YoY to | 2346.2 crore (I-direct estimate: | 2502.7 crore) on the back of a low base, impacted by the Maggi noodles issue in the corresponding quarter last year. Domestic sales increased 37.9% while exports increased 5.1%. The company has launched 25 new products in the last three months, which has also contributed to a recovery in sales post the Maggi noodles issue Operating margins improved 315 bps at 19.6% (I-direct estimate:...

Recuperating from Maggi Noodle Fiasco; Opportunity Beckons:Milk Products and Nutrition to grow at a CAGR of 3.1% over CY16E-18E - NIL enjoys a leadership position in Milk and Nutrition segment, the same contributing to around 45% of the company's revenue. Milk Products and Nutrition is expected to grow at a CAGR of 3.1% from CY16E-CY18E on the back of new product launches and the company's strong brand equity.

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.