Prabhudas Lilladher's research report on Nestle India
We upgrade Nestle to Accumulate from hold given improved growth visibility led by initiatives like 1) Cluster based strategy to go deeper and increase sales in interiors 2) extending Maggi to new snacking products and 3) strong innovation pipeline and high success rates of new launches. Although most Agri inputs have been moving up, NEST seems better placed given that 51% of input cost basket (Milk, SMP, Coffee and Cocoa) is benign. This will enable Nestle to neutralize margin pressures on firming up of crude, wheat, sugar and palm oil, although margin expansion from current levels looks unlikely.
Outlook
We value the stock at 46xCY20 EPS and arrive at target price of Rs10996. We believe 18% correction in stock price provides a good entry opportunity for long term gains. Upgrade to Accumulate
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