Nestle India Ltd. share price target

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.

For Q1CY23, NEST’s revenue was INR 48,305 mn (+21.0% YoY/ +13.5% QoQ), its highest quarterly growth in the last decade (excluding an exceptional quarter in 2016). The sales growth in domestic markets was 21.2% YoY due to a healthy balance of pricing, volume and mix. Sales growth in export markets was 24.9% YoY.

Highest quarterly growth in the last decade supported by a strong performance across product segments in Q1CY23

Nestle’s revenue growth of 21% YoY (highest ever in last decade on LFL basis) was above our (and consensus) estimates driven by price hikes. Maintaining volume growth trajectory coupled with mix improvement despite price hikes is impressive (no surprises though).