Nestle India Ltd. share price target

Nestl India's Q2CY15 results were below our and consensus estimates due to the Maggi controversyaffectingoverallbusinessgrowth.InQ2,netsalesdeclined20%yoyandEBITDA fell26%.Maggi,whichaccountedforRs25bninsalesinCY14,continuestobeabsentinthe...

Recently, various Indian state governments have accused Nestle of selling Maggi Noodles containingdangerouslyhighlevelsofleadandmonosodiumglutamate(MSG).Thishasled to revenue loss and erosion in Maggi's brand value. As more states move towards testing...

Maggi is synonymous to comfort food in India and has been a dominant brand in the instant noodles space for over 32 years, enjoying a market share of over 70%. Despite increased competition from other private labels and national entrants in the instant noodles space including ITC (Yipee), Nissin (Top Ramen), HUL (Knorr) and GSK Consumer (Foodles), Nestle has been able to maintain its dominant share. However, its dominance seems to be under threat, given the pessimism surrounding the brand and if Nestle India does not take appropriate brand building and reputation damage control exercise at the earliest....

Nestles 1QCY15 revenues grew by 8.4% YoY to Rs 25.2bn as the domestic business disappointed with a 7.6% YoY growth (4QCY14 : 11.3% YoY). Back of the envelope calculations suggest flat volumes (YoY) in the domestic business.

Nestles 4QCY14 revenues grew by 11.8% YoY to Rs 25.3bn as the domestic business continued its upward trajectory with a 11.3% YoY growth (3QCY14 : 9.9%, 2QCY14 : 9.7%, 1QCY14 : 3.4%). Back of the envelope calculations suggest a 3-3.5% YoY volume growth in the domestic business.