Nestle India Ltd. share price target

Incremental insights from Nestle's analyst meet were – (1) sales-driven initiatives have contributed ~3-4% of ~7% volume CAGR over last 5 years (see our report); however, incrementally, line selling will be the key driver (though at a slower pace), (2) penetration-led volume growth (through continued thrust on rurban strategy), (3) dialling up of innovation (multiple niche launches; 10 new projects in the pipeline) to drive its contribution to 10% (from 6% currently) in the medium term.

Nestle’s revenue growth of 10% YoY is healthy and ~21-22% YoY growth in EBITDA/PAT is even stronger, driven by price retention benefits given stability in the raw material price (especially milk - report). Revenue growth was strong across key segments driven by (1) deeper penetration in RURBAN (lower-tier towns and villages (report), (2) a portfolio which is better insulated to market slowdown.

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.

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

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