The Nestle India share price rose 3 percent in the early trade on October 20 after the company declared its September quarter earnings.
Nestle India on October 19 reported a profit after tax (PAT) of Rs 617 crore for the quarter ended September 2021 (Q3FY22), a growth of 15 percent from Rs 538.6 crore reported in the previous quarter. Profit grew by 5 percent on a year-on-year (YoY) basis from Rs 587.1 crore.
Revenues came in higher by 12 percent at Rs 3,882.6 crore for the quarter, compared to Rs 3,476.7 crore in the June quarter. On a YoY basis, the numbers grew by 10 percent from Rs 3,541 crore.
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Here is what brokerages have to say about the stock and the FMCG giant after its September quarter earnings:
Credit Suisse has kept 'neutral' call on the stock due to stretched valuations, while it raised the target price to Rs 19,500.
The steady double-digit growth continues, while input cost pressure shows up.
Credit Suisse has lowered the CY21-23 earnings estimates by 2-4 percent to build in input cost inflation and there is limited room for earnings upgrades.
Goldman Sachs has maintained a 'sell' call with a target at Rs 12,428 as revenue was a beat but the company flags margin risks.
The EBITDA beat was led by better revenue, while its gross margin was 54 bps below the estimate. The domestic revenue growth of 10 percent was led by high single-digit volume and mix growth.
Morgan Stanley has maintained an 'equal-weight' call with a target at Rs 18,057 as earnings was ahead of the estimates, but missed consensus.
The double-digit domestic revenue growth and recovery in out-of-home channels were the key positives. However, high commodity inflation remains a headwind.
Broking house CLSA has maintained 'outperform' call with a target at Rs 19,500.
The Q3 was weaker was than expected, with sales, EBITDA and PAT up 10, 6, and 3 percent YoY and inflation hindered gross margin 240 bps YoY to 55.5 percent.
With capacity expansion and focus on improving reach in key markets, the company is well-poised to achieve double-digit earnings growth in the medium term.
This, along with cheery dividend payouts, makes it a good pick from a long-term perspective. It maintained a 'buy' call on the stock with an unchanged price target of Rs 22,395.
The long-term narratives for company's revenue and earnings growth are highly attractive. The Packaged Foods segment in India offers immense growth opportunities. This is particularly true for a company such as Nestle, which has a strong pedigree and distribution strength. Successful implementation of its volume-led growth strategy in recent years provides confidence in execution as well.
Valuations at 60.8x CY23E EPS are, however, expensive and do not offer any upside from a one-year perspective, it said. The brokerage values the company at 60x CY23E EPS to arrive at its target price of Rs 19,100. It maintained its 'neutral' stans on the stock.
We expect near-term margin pressure to sustain, given an inflation in palmoil, coffee, wheat and liquid milk. The broking house estimates 13.6 percent PAT CAGR over CY21-23.
It maintained 'accumulate' rating with a target price of Rs 19,501 on DCF basis (Rs 19,717 earlier). Long-term outlook is intact but expect back-ended returns, given rich valuations of 63.8xSept23 EPS, it said.
At 9:28am on October 20, Nestle India was quoting at Rs 19,988.85, up Rs 611.35, or 3.15 percent on the BSE.
The share touched a 52-week high of Rs 20,599.95 and a 52-week low of Rs 15,773.15 on September 14, 2021 and October 22, 2020, respectively.
Currently, it is trading 2.97 percent below its 52-week high and 26.73 percent above its 52-week low.Disclaimer: The above report is compiled from information available on public platforms. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.