The company reported operating revenues of Rs 3,739 crore, posting 8.9 percent rise over the Rs 3,433 crore topline a year back
Nestle India
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Nestle India shed nearly 3 percent in early trade on February 18 a day after the company announced its December quarter results.
Nestle India on February 17 reported a net profit of Rs 386.6 crore for the fourth quarter ended December 2021, down 20 percent from Rs 483 crore a year earlier.
The company follows January-December as the financial year.
The profit stands lower by 37.7 percent from Rs 617 crore reported in the previous quarter which included a contingency provisioning of Rs 38 crore without which the profit would have been higher.
The FMCG giant reported operating revenues of Rs 3,739 crore, posting 8.9 percent rise over the Rs 3,433 crore topline a year back. On a sequential basis, the revenue declined 4 percent from Rs 3,883 crore clocked in the previous quarter.
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Here is what brokerages have to say about the stock and the company after the December quarter earnings:
Nomura
Broking house has reaffirmed the ‘buy’ rating on the stock and raised the target to Rs 21,150 from Rs 20,750.
The steady growth in uncertain times was a virtue with Q4 volume+mix up 8 percent YoY, was a highest versus the peers.
New products contributed 4.9 percent to the 2021 sales versus 4.3 percent in 2020. It sees price hikes as a last resort and the company will try to mitigate input-cost inflation with scale leverage and cost savings.
Nomura expect company to maintain its double-digit sales growth over the medium term. It lower 2021/22/23 EPS by 1 percent/3 percent/5 percent to factor in a delayed margin recovery.
Morgan Stanley
The research house retained ‘underweight amid relative valuations’ for the stock. It has kept a target price at Rs 15,712 as the Q4 earnings were ahead of estimates on better margin.
“The weaker growth in largest category and margin pressures from inflation headwinds. The relative valuations keep us underweight,” it said.
Credit Suisse
The brokerage firm has kept ‘neutral’ rating on stretched valuations and kept a target at Rs 20,000.
There was a healthy volume growth, with relatively lower margin pressure. The company faces relatively lower input cost pressures.
ICICI Securities
The research house has upgraded the stock to ‘add’ and also raised target price to Rs 20,000 from Rs 19,500.
A domestic revenue growth of 9 percent YoY was steady, though slightly unexciting. There was a good performance in most parts of business while infant nutrition was slightly weak.
The company is benefitting from improved product availability and expansion, while see some near-term challenges due to inflationary raw material.
CLSA
The broking house has maintained ‘sell’ rating with a target at Rs 17,370 as the margin pressure continues and topline thrust remains.
The domestic sales grew 9.2 percent, with 8 percent volume & mix growth. The urban salience aided its topline and rural saw high single-digit growth.
The gross margin contracted 226 bps YoY to 56.6 percent as the prices for 6 of the 13 commodity baskets are at 10-year highs.
Jefferies
The brokerage house has maintained ‘hold’ rating in the stock and cut target price to Rs 18,600 from Rs 18,800.
The Q4 performance was better-than-expected, especially on the margin with gross margin recovered QoQ, after declining for 3 quarters.
The strong cost controls also helped in delivering flat YoY EBITDA margin. The input price environment remains tough.
Prabhudas Lilladher
“We expect near term margin pressure to sustain given inflation in palm oil, coffee and cocoa. We estimate 12.2 percent PAT CAGR over CY21-24. Long term outlook is intact but expect back ended returns given rich valuations of 59.6xCY23 EPS,” it said.
The brokerage maintained ‘accumulate’ rating with a target price of Rs 19,120 on DCF basis (Rs 18,723 earlier).
Sharekhan
Nestle is the largest food company with a strong portfolio of brands in the packaged food and beverages space, which will help it achieve good growth at a time when consumers are shifting to trusted brands, rural aspirations are improving, thereby boosting overall penetration.
With capacity expansion (commissioned 9th factory in Sanand, Gujarat) and focus on improving reach in key markets, the company is well-poised to achieve double digit earning growth in the medium term.
This, along with cheery dividend payout, makes it a good pick from a long-term perspective. “Thus, we maintain a ‘buy’ recommendation on the stock with an unchanged price target of Rs 22,395,” it said.
Motilal Oswal
There is no material change to our CY22E and CY23E EPS forecasts.
The long-term narratives for revenue and earnings growth are highly attractive. The packaged foods segment in India offers immense growth opportunities. This is particularly true for a company such as NEST, which has a strong pedigree and distribution strength. The successful implementation of its volume-led growth strategy in recent years provides confidence in execution as well.
“We value the company at 60x March 2024 EPS to arrive at target price of Rs 19,400. We maintain our ‘neutral’ stance,” it said.
At 9:18am, Nestle India was quoting at Rs 17,945.00, down Rs 139.55, or 0.77 percent, on the BSE.
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