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Nestle India has a strong Q1, here is what foreign brokerages have to say

The company has reported a 14.6 percent year-on-year growth in the first-quarter profit at Rs 602.25 crore and also declared an interim dividend of Rs 25 per share.

April 22, 2021 / 09:37 AM IST
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Nestle India share price rose in the early trade on April 22 after the company reported a 14.6 percent year-on-year growth in the first-quarter profit at Rs 602.25 crore, backed by double-digit volume growth and better-than-expected operating performance.

Revenue from operations grew by 8.6 percent year-on-year to Rs 3,610.82 crore in the quarter ended March 2021, the company announced on April 20.

At the operating level, earnings before interest, tax, depreciation and amortisation (EBITDA) in Q1CY21 grew by 17.1 percent to Rs 929.8 crore and margin expanded 190 bps to 25.8 percent compared to the year-ago period.

The company, which follows a January-December financial year, also declared an interim dividend of Rs 25 per share.

Also Read - Nestle India Q1 profit grows 14.6% to Rs 602 crore, operating numbers beat estimates


Here is what brokerages have to say about the stock and company after Q1 earnings:

Citi | Rating: Buy | Target: Rs 18,710

The company posted steady revenue, while slightly better margin expansion. The business outlook remains fairly healthy and mid-to-long-term thesis remains intact. Penetration-led growth, focus on innovation and renovation are key drivers.

CLSA | Rating: Outperform | Target: Cut to Rs 19,000

The company sustained double-digit growth. Q1 operationally was in line but earnings are a miss from non-operating heads. CLSA has cut EPS estimates by 1-2 percent over FY20-23.

Credit Suisse | Rating: Neutral | Target: Rs 18,350

The company reported a steady topline, while margin pressures is likely ahead. The broking house positive on the company's long-term prospects and focus on innovation-led growth.

It maintains a "neutral" rating due to stretched valuations, while there is limited room for a positive surprise, given rising input costs. It has cut CY21-23 earnings by 2 percent.

Nomura | Rating: Buy | Target: Rs 20,500

The margin to see the least impact of input cost pressure versus peers. Nomura expect a significant increase in new launches and product innovations and sees stable sales growth with a positive bias.

Macquarie | Rating: Neutral | Target: Rs 18,200

The Q1 PAT was above estimates as lower employee costs offset margin contraction. The continued strength in domestic sales raises comfort on EPS estimates.

The restrictions to counter the second COVID-19 wave should aid in-home consumption and see limited room for upside at current levels.

JPMorgan | Rating: Neutral | Target: Rs 17,700

JPMorgan expects healthy double-digit revenue growth momentum to sustain. The capacity addition for noodles, confectionery and coffee will support the demand.

Emerging second COVID-19 wave will further aid at-home consumption. The COGS headwinds could weigh on H2 margin and may necessitate pricing actions. Its current valuations capture franchise strengths.

Goldman Sachs | Rating: Sell | Target: Rs 12,905

Results were in line with higher gross margin but higher other expenses. Retain the 'sell' rating, given the competitive intensity in key product categories. On revised estimates, the company offers a 12 percent EPS CAGR over FY20-23, while valuation looks stretched versus peers.

YES Securities | Rating: Add | Target: Rs 18,000

With another resilient performance despite a strong base, our conviction on Nestle India as one of our top picks in the staples space increases further. Our key investment thesis of sustained double-digit domestic growth and premiumisation potential of its categories, opportunities for further deepening distribution especially in rural markets and aggression on new launches and marketing spends remains intact.

Dolat Capital | Rating: Accumulate | Target: Rs 17,765

We have marginally tweaked our CY21E and CY22E EPS estimates at Rs 262 (+1.2 percent), Rs 294 (+1.3 percent), respectively, to factor in Q1 performance and expected up stocking during lockdown. Considering niche play and unique positioning in multiple categories, we believe that the stock would continue to command higher premium compared to peers.

Sharekhan | Rating: Buy | Target: Rs 19,055

We have broadly maintained our earnings estimates for CY2021 and CY2022 and would keenly monitor the performance in the coming months. Nestle is the largest food company, with a strong brand portfolio in the packaged food and beverages space which will help it achieve good growth at a time when consumers are shifting to trusted brands and rural aspirations are improving, thereby boosting overall penetration.

We expect the company’s revenue and PAT to report a CAGR of 13.6 percent and 19.2 percent, respectively, over CY2020-CY2022. The stock is trading at 55.7x its CY2022E earnings. Strong return profile, future growth prospects, and good dividend payout make it a better pick in the FMCG space.

Prabhudas Lilladher | Rating: Accumulate | Target: Rs 18,450

We believe the company’s decision to capitalise on rural growth by increasing village coverage by 33 percent using 30-40 percent of relevant products and launching rural-centric products will result in strong long- term growth given rural and semi-urban markets are growing at 2-2.5x of urban.

The company will continue its innovation-led growth strategy, given the high success rate of new products and expect to launch 40-50 new products.

At 0915 hours, Nestle India was quoting at Rs 17,150.00, up Rs 63.75, or 0.37 percent, on the BSE.

The share touched a 52-week high of Rs 18,821.45 on December 24, 2020 and a 52-week low of Rs 15,104.25 on September 22, 2020. It is trading 8.88 percent below its 52-week high and 13.54 percent above its 52-week low.

Disclaimer: The above report is compiled from information available on public platforms. advises users to check with certified experts before taking any investment decisions.
Moneycontrol News
first published: Apr 22, 2021 09:36 am

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