Nestle India share price slipped over 4 percent in early trade on February 17, a day after the company announced its December quarter results.
The company reported a 2.3 percent year-on-year (YoY) growth in profit for the quarter ended December 2020, missing analysts' expectations.
Profit increased to Rs 483.3 crore during the quarter, compared to Rs 472.6 crore in the corresponding period of the previous fiscal.
Revenue from operations in Q4 CY20 grew by 9 percent year-on-year (YoY) to Rs 3,432.6 crore, driven by domestic sales that increased 10.1 percent to Rs 3,260.7 crore, but exports declined 7.7 percent to Rs 156.82 crore in Q4.
Also Read - Nestle posts 2.3% rise in Q4 profit at Rs 483.3 crore, misses estimates; firm announces final dividend of Rs 65 apiece
Here is what brokerages have to say about the stock and the company after the Q4 CY20 earnings announcement:
Credit Suisse | Rating: Downgrade to neutral | Target: Rs 17,800
There was a steady double-digit growth, but limited room for a surprise going ahead. Credit Suisse cut earnings for CY21/22 by 3-4 percent, while remaining positive on the company’s long-term prospects.
Jefferies | Rating: Hold | Target: Rs 19,000
The Q4 domestic revenue growth was similar to the previous quarter, while margin barely moved up and came below estimates.
The higher tax rate led to near-flat earnings & caused an earnings miss.
There is no material change to our EPS forecasts. The Rs 26b capex (over the next 3-4 years) announced with the Q3CY20 result and resumption of healthy marketing spends in Q4CY20 indicate that the management's confidence is high on both its near-term and long-term growth prospects.
Valuations of 59x CY22E EPS appear to completely factor in upside from one-year perspective. We value the company at 60x Dec'22E EPS to arrive at our target price of Rs 17,500 per share. Maintain Neutral.
We are reducing CY21/22 EPS estimates by 4.6%/3.8% on the back of high employee cost witnessed during the quarter. Double-digit growth in key brands like Maggi, Kitkat and Nescafe along with improvement in Out of Home category bodes well for the company. Q4 results were below expectations on account of lower coffee exports resulting in 7.7% de-growth in exports and increase in employee cost due to higher incentives on account of Covid and finalization of long term compensation arrangements for factory employees.
We estimate 12.5% PAT CAGR over CY20-22 and assign target price of Rs 17,364 (Rs 17,640 earlier). We retain Hold, however, expect back-ended returns given rich valuations of 62xCY22 EPS.
We have marginally tweaked our CY21E and CY22E EPS estimates at Rs 259 (-2.0%), Rs 290 (-1.5%) respectively to factor in Q4 performance.
Considering niche play and unique positioning in multiple categories, we believe that the stock would continue to command a higher premium compared to peers. Valuing the stock at 60x CY22E EPS, we have arrived at a target price of Rs 17,667. Maintain Accumulate. Buy on dips.
At 09:24 hrs, Nestle India was quoting at Rs 16,425, down Rs 792.25, or 4.60 percent on the BSE.
The share touched its 52-week high Rs 18,821.45 and 52-week low Rs 12,588.95 on 24 December, 2020 and 19 March, 2020, respectively.
Currently, it is trading 12.73 percent below its 52-week high and 30.47 percent above its 52-week low.
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