Nestle up 3% on hopes of Maggi's return; analysts positive

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Moneycontrol Bureau Shares of Nestle India rose 3 percent intraday on Tuesday after it has got clean chit from two states for its popular noodle brand Maggi. Both Gujarat and Karnataka have lifted ban on manufacturing and sale of Maggi.

Last week, the Indian arm of the FMCG major received favourable results from all three laboratories mandated by Bombay High Court to test noodles samples.

However, Nestle had said that it will start selling Maggi noodles only after the newly manufactured products are also cleared by the designated three laboratories.

So, how to trade Nestle now?

Nomura maintains buy rating on the stock and believes that Maggi noodles should be seen on the shelves soon. It says that there would be a short-term impact on sales and profitability of the company for a few quarters, but the company should be able to fix the product and bring it back to the market.

It is convinced that it will not have a long-term impact on Nestle's brand value. The brokerage has a target price  of Rs 6950 per share.

ICICIdirect.com recommends buying the stock with a target price of Rs 7240 per share.

However, Religare reiterates sell rating with a target price of Rs 5500 due to its rich valuations.

In August 2015, the court had asked that Maggi noodles be newly tested in three independent labs in Hyderabad, Mohali and Jaipur. If the lead content would be within permissible limits, then Nestle would be free to manufacture and sell the noodles.The size of the brand is Rs 2500 crore in sales and contributes to around 25 percent of the company’s total portfolio in terms of revenues.

The company had incurred an one-time loss of Rs 451.7 crore in April-June quarter due to Maggi stocks withdrawn including incidental costs. Sales were badly hit by Maggi noodles ban. During the quarter, total income was down 19.5 percent at Rs 1957 crore against Rs 2432 crore (Y-o-Y). The company says net sales worth Rs 288.4 crore was reversed in Q1 due to withdrawal of Maggi noodles from market.At 11:39 hrs Nestle India was quoting at Rs 6,570.00, up Rs 93.85, or 1.45 percent on the BSE.Posted by Nasrin SultanaFollow @NasrinzStory