Hold Nestle India; target of Rs 6040: ICICIdirect

ICICIdirect.com has recommended to hold Nestle India with a target price of Rs 6040, in its research report dated July 31, 2015.

July 31, 2015 / 14:34 IST

26 Aug, 2025 12:21

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ICICIdirect.com's report on Nestle India
Nestlé India (NIL) posted a 20.1% decline in sales mainly due to a recall of Maggi noodles in India. The recall has resulted in a reversal of Rs 288.4 crore of sales. We believe one-time cost of recall, logistics, destruction on Maggi noodles & other related expenses are estimated to be ~Rs 163. Export sales also witnessed de-growth of 12.7% mainly due to lower coffee exports to Russia

NIL witnessed a 362 bps savings in raw material cost to sales mainly due to a significant decline in commodity cost. However, a 210 bps higher employee expense to sales & 277 bps increase in other overhead to sales resulted in a 87 bps decline in operating margins

The company posted a loss of Rs 64.4 crore mainly due to Rs 451.6 crore of exceptional loss due to recall of Maggi noodles

"The recent regulatory issue that NIL faced would have an impact on the topline as well as bottomline in CY15E. However, we expect NIL to resolve this issue related to its noodles and invest heavily in rebuilding its brand equity by CY16E. We expect a sharp recovery in sales & earnings in CY16E at Rs 11110 crore and Rs 1174 crore, respectively. We believe recent events would remain an overhang on the stock in the medium term. However, NIL would be able to get back to the steady growth state from CY16E onwards. Hence, we maintain our target price of Rs 6040/share with HOLD rating on the stock", says ICICIdirect.com research report.

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