Nestle India Ltd. share price target

28 July 2020 Nestl (NEST)s revenues for the quarter disappointed, weighed by ephemeral lockdown issues, which impacted manufacturing. We believe this would not pose much of a challenge going forward. EBITDA margins were in-line likely due to ad spend cuts, aligned with peers that have reported their results thus far. NEST remains among the best structural plays in the Indian Consumer and (b) the evident revival in topline and earnings momentum ahead of peers in recent years. Valuations are, however, rich at 67.2x CY21 EPS and 56.6x CY22 EPS. Maintain Domestic sales grew 2.6% YoY during the quarter, whereas export sales declined 9.3% YoY. particularly the cost of milk and its derivatives. Higher staff costs as a percentage of sales (+170bp YoY to 12.1%) and lower other expenses as a percentage of sales (-440bp YoY to 19.

We are cutting CY20-23 EPS estimates of Nestle by 3.2% to 4.2% on disappointing performance in 2Q20. Although Nestle posted positive sales growth of 2.6% despite setback in vending business, constraints in production and distribution limited gains in a very strong quarter for food essentials. We were also surprised at GM pressure given benign prices of...

from E-commerce went up significantly during the quarter thus benefitting the bigger brands in gaining...

CY19 was another year of double-digit sales and volume growth in Prepared Dishes (largely 2010, NEST has witnessed highest growth in the Chocolates and Confectionary segment in 2019 with over 15% volume/value growth along with market share gain for the first time in many years. With high category growth opportunity in foods and NESTs focus on volume led double-digit growth backed by new launches, prospects of top-line growth remain bright. The emphasis on volume growth focus is clearly becoming more Net sales stood at INR123.7b in CY19, growing 9.5% YoY. However, due to a sharp decline in export sales, royalty expense to net sales appear to have increased by EBITDA grew 5.7% YoY to INR28.9b in CY19. On 5-year basis, NESTs PAT CAGR looks relatively weak, primarily due to the Nevertheless, the close to double-digit PAT CAGR for 5 years is still a Capex for CY19 stood at INR1.6b with capex to sales up 10bp YoY to 1.3%.

Mr. Suresh Narayanan, Chairman and Managing Director, Nestl ndia said, The COVID-19 crisis is having an extraordinary and far reaching impact on our lives. For us at Nestl India, every crisis takes us back to our roots as an 108 year old organization serving India - our purpose and values; protecting our people, their lives and livelihood, the thousands of partners...

On account of the limited upside from the current market price, we reiterate our rating on the stock as HOLD, with a revised target price of Rs. 17,460 based on 62x CY21E adj. EPS. Domestic sales drives performance Nestle India Limited registered a revenue growth of 10.7% YoY in Q1CY20 to reach Rs. 3,325cr (vs. Rs. 3,003cr in Q1FY19). This growth was largely supported by increase in Domestic sales (10.7% YoY) driven by volume and mix, and improved Export sales (12.9% YoY) on account of lower base. Brands like Maggi, KitKat, Nestle Munch helped...

Nestle India Limited is an India-based company engaged in food business. Nestl is the world's leading Nutrition, Health and Wellness Company. The Company was founded in 1866. The food business incorporates product groups through milk products and nutrition, beverages, prepared dishes and cooking aids, chocolates and confectionery. The Company's brands include NESCAFE, MAGGI, MILKYBAR, KIT KAT, BAR-ONE, MILKMAID,...

Manufacturing disruption to hit revenue in Q2CY20 Though the company is witnessing higher demand for Maggi (entire prepared dishes segment), manufacturing has still been disrupted in some of its plants. Our channel check suggests usual sales during April as the company was able to supply with existing inventories & usual manufacturing from some of its plants (Moga, Punjab & Goa plants are working at full capacity). However, noodles & coffee supplies are getting depleted in May 2020 with some plants working on reduced capacity mainly due to labour...

12 May 2020 Nestle Indias (NEST) 1QCY20 double-digit domestic sales growth in the current environment (due to the COVID-19 crisis) is impressive. While higher milk and milk derivative costs have led to margin compression, long- term earnings prospects remain robust. Valuations of 67x CY21E EPS and 56.5x CY22E EPS fully factor in the upside from a 1-year perspective. Domestic sales grew 10.7% during the quarter, largely driven by volume and mix. EBITDA grew 4.7% YoY to INR8b (v/s est. INR7.8b), PBT was flat YoY at INR7.

Gross margins pressure to abate given sharp decline in commodities Nestle has sustained strong sales momentum given strong show by Maggi and Chocolates and also pantry stocking in key categories. Our channel checks suggest sustained growth in 2Q21 also given that lockdown is forcing consumers to undertake pantry stocking in Maggi, tetrapack Milk, Coffee and Dairy whitener in particular. Our sales mix analysis suggested that Nestle is...