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Accumulate Nestle India; target of Rs 19,721: Prabhudas Lilladher

Prabhudas Lilladher recommended accumulate rating on Nestle India with a target price of Rs 19,721 in its research report dated July 28, 2022.

July 31, 2022 / 03:27 PM IST
 
 
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Prabhudas Lilladher's research report on Nestle India


NEST continues to show double digit growth across key segments primarily led by mid to high single digit volume growth, pricing & mix improvement. NEST’s continued focus on Rurban strategy resulting in double digit growth in small towns & villages while T1/2 cities sustained momentum. GM softened by 100bps QoQ due to high input costs and we expect it to bottom out with softening up of edible oil price & packing materials whereas prices of milk, grain & coffee remains an overhang in near term. Mgt highlighted its growth strategy around 1) Innovations being part of Nestlé’s DNA (contribution up from 1.5% to 5.6% in 5 years) 2) Expanding reach with increased focus on Rural through creation of Rural distribution centers and wholesale hubs led to 2x growth in villages. 3) unleash the potential of evolving categories and 4) Increased focus on creating more SKUs across different brands. We believe PURINA acquisition provides entry into a high growth segment, however given small size, it will not move the needle in the medium term. Launch of GERBER marks entry in premium toddler food products, however expect slow scalability given super premium pricing.


Outlook


We estimate 12.4% PAT CAGR over CY21-24 and assign DCF based target price of Rs19721 (Rs19426 earlier). Retain Accumulate.


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Nestle India - 290722 - prabhu

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first published: Jul 31, 2022 03:27 pm
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