What should investors do with Nestle India: buy, sell or hold post Q1?

Revenue from operations during the quarter increased 1.7 percent to Rs 3,050.48 crore compared to the same period last year.

July 29, 2020 / 09:51 AM IST

Nestle India's share price slipped in the early trade on July 29, a day after the FMCG major reported percent growth in its year-on-year net profit at Rs 486.6 crore in the June quarter.

Revenue from operations during the quarter increased 1.7 percent to Rs 3,050.48 crore compared to the same period last year.

Also Read - Nestle India Q2 profit jumps 11% to Rs 487 crore as COVID-19 adversely impacts sales

Here is what brokerages have to say on the stock and the company:

Motilal Oswal | Rating: Neutral | Target: Rs 16,700

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There has been no material change in CY20/CY21 EPS estimates. The long- term narrative of the company's topline and earnings growth remains extremely attractive. Not only is the successful implementation of its growth strategy in recent years a positive but the packaged foods segment in India also offers immense growth opportunities.

In the near term, the stock offers better resilience on the topline versus peers owing to the nature of its portfolio and its superior efficiency.

Current valuations of 67.2x CY21E EPS and 56.6x CY22E EPS appear to be completely factoring in upside for the next year.

Prabhudas Lilladher | Rating: Reduce | Target: Rs 14,089

Prabhudas Lilladher is cutting CY20-23 EPS estimates of Nestle by 3.2 percent to 4.2 percent on disappointing performance in 2Q20. Though Nestle posted a sales growth of 2.6 percent despite set back in vending business, constraints in production and distribution limited gains in a very strong quarter for food essentials.

The broking house believes that expanding margins from current levels looks difficult as a cut in ad spend has bottomed out and input costs of SMP, palm oil, wheat and sugar are steady.

In addition, structural concerns on low growth in infant nutrition and beverages still remain.

At 0921 hours, Nestle India was quoting at Rs 17,114.45, up Rs 15.50, or 0.09 percent, on the BSE.
Moneycontrol News
first published: Jul 29, 2020 09:51 am

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