Last Updated : Oct 26, 2020 03:45 PM IST | Source: Moneycontrol.com

Reduce Nestle India; target of Rs 14,080: HDFC Securities

HDFC Securities recommended reduce rating on Nestle India with a target price of Rs 14,080 in its research report dated October 23, 2020.

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HDFC Securities' research report on Nestle India


Nestle’s 3QCY20 was healthy as the company clocked 10% YoY growth (HSIE 8%). Packaged food category has done well, and Nestle’s performance in the past two quarters was steady (6.5% YoY growth). Maggi, Kitkat and Nescafe (in-home consumption) posted double-digit growth. Exports also bounced back with 9% YoY growth. GM expansion was slower at 54bps YoY (58.1%). Cost control initiatives led to EBITDA growth of 16.5% (HSIE 16%). We expect Nestle’s recovery to be steady, and we maintain our EBITDA estimates. As the increase in Capex has resulted in lower other income, we cut our EPS estimate for CY21/CY22 by 3/3%.


Outlook


The stock is trading at 60x P/E on CY21 EPS and limits absolute upside in the medium term, making the risk-reward unattractive. We roll forward our target price to Sep-22E EPS and value Nestle at 50x P/E to derive a TP of Rs 14,080. Maintain REDUCE.


For all recommendations report, click here


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First Published on Oct 26, 2020 03:45 pm
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