Buy Nestle India: target of Rs 19,055: Sharekhan

Sharekhan's research report on Nestle India

Nestle India (Nestle) maintained its thrust on achieving double-digit revenue growth by penetrating deep in rural markets (covered 89,288 villages), innovation (that contributes 4.3% of sales) and accelerating footprint through new channels. Revenues grew by 8.1%y-o-y in CY2020, driven by a 5.7% volume growth. Barring Q2, volume growth stood at 7-8% (value growth was at 10-11%) in all other quarters. OPM stood at 24% in CY2020. Though input prices are rising, efficient procurement and Project Shark are expected to keep OPM high y-o-y. The stock has corrected by ~15% from highs and is trading at 53x its CY2022E EPS. Strong return profile, growth prospects and cheery dividend payout make Nestle a good pick.

Outlook

We maintain Buy with unchanged PT of Rs. 19,055.