Nestle India Ltd. share price target

Domestic business posted double-digit growth in Q3 with continued margin expansion

We recommend a BUY rating on the stock with a near-term TP of Rs 24,100, implying an upside of 10% from the CMP.

Q2 revenue up 15% YoY led by strong growth across categories and geographies; margins remained healthy

Recommendation: With an 10% upside potential from the CMP, we maintain our BUY rating on the stock.

Nestle’s revenue growth of 15% YoY in Q2CY23 was largely in line with our estimates. Double-digit growth across segments for fifth consecutive quarter was driven by (1) deeper distribution expansion in lower-tier towns and villages (see our report), (2) strong performance in mega and metro cities, and (3) a portfolio which is better insulated to overall market slowdown.

Our analysis of Nestle’s consumer-price retention power in milk products and nutrition segment (~40% of revenues and >50% of profits) indicates potential for material gross margin expansion in the event of milk price deflation (See Table 1).

Recommendation: With a 11% upside potential from the CMP, we maintain our BUY rating on the stock.