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

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Nestle India on April 20 reported a 14.6 percent year-on-year growth in the first-quarter profit at Rs 602.25 crore, backed by double-digit volume growth and better-than-expected operating performance. Profit in the corresponding period stood at Rs 525.43 crore.

Revenue from operations grew by 8.6 percent year-on-year to Rs 3,610.82 crore in the quarter ended March 2021.

At the operating level, earnings before interest, tax, depreciation and amortisation (EBITDA) in Q1CY21 grew by 17.1 percent to Rs 929.8 crore and margin expanded 190 bps to 25.8 percent compared to year-ago period.

Nestle also declared an interim dividend of Rs 25 per share.

Also Read - Nestle India Q1 profit grows 14.6% to Rs 602 crore, operating numbers beat estimates

Here is what brokerages have to say on the stock and company after Q1 earnings:

YES Securities | Rating: ADD | Target: Rs 18,000

With another resilient performance from Nestle despite a strong base, our conviction on Nestle India as one of our top picks in the staples space increases further. Our key investment thesis of sustained double-digit domestic growth and premiumization potential of its categories, opportunities for further deepening distribution especially in rural markets and aggression on new launches and marketing spends remains intact.

Dolat Capital | Rating: Accumulate | Target: Rs 17,765

We have marginally tweaked our CY21E and CY22E EPS estimates at Rs 262 (+1.2%), Rs 294 (+1.3%) respectively to factor in Q1 performance and expected up stocking during lockdown. Considering niche play and unique positioning in multiple categories, we believe that the stock would continue to command higher premium compared to peers.

Sharekhan | Rating: Buy | Target: Rs 19,055

We have broadly maintained our earnings estimates for CY2021 and CY2022 and would keenly monitor the performance in the coming months. Nestle is the largest food company with a strong brand portfolio in the packaged food and beverages space, which will help it achieve good growth at a time when consumers are shifting to trusted brands and rural aspirations are improving, thereby boosting overall penetration.

We expect the company’s revenue and PAT to report a CAGR of 13.6% and 19.2%, respectively, over CY2020-CY2022. The stock is currently trading at 55.7x its CY2022E earnings. Strong return profile, future growth prospects, and good dividend payout make it a better pick in the FMCG space.

Prabhudas Lilladher | Rating: Accumulate | Target: Rs 18,450

We believe company’s decision to capitalize on rural growth by increasing village coverage by 33% using 30-40% of relevant products and launching rural centric products will result in strong long term growth given rural and semi-urban markets are growing at 2-2.5x of urban.

Company will continue its innovation led growth strategy given high success rate of new products and expect to launch 40-50 new products.

On April 20, Nestle India ended at Rs 17,086.25, down Rs 4.10, or 0.02 percent on the BSE.

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.