Motilal Oswal's research report on Nestlé India
Nestlé India (NEST) declared broadly in-line 2QCY22 result. Volumes and price increases have played an equal part in driving 13.3% sales growth in 1HCY22 with volumes growing 7% and realization making up for the rest. Management pointed out that while there has been some softening in edible oil and packaging costs; milk, green coffee, wheat, etc. are at all-time high levels and are likely to remain firm for some more time. NEST’s strategy of avoiding sharp price hikes, unlike the past, means that nearterm margins would continue to be under pressure. The acquisition of Purina PetCare’s India business (100% owned by Nestle earlier) is a good move from a CG perspective and launch of ‘Gerber’ nutrition brand is good; however, both of these will take time to scale up.
Outlook
We value the stock at 60x Jun'24 EPS to arrive at our TP of INR19,500. Maintain Neutral on fair valuations.
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