Prabhudas Lilladher has given Accumulate recommendation for Nestle India with a target price of Rs. 19,120 in its research report issued on Feb 17, 2022
Prabhudas Lilladher’s research report on Nestle India
Nestlé 4Q21 reported an encouraging 8% volume growth and 10% EBIDTA growth as 210 bps lower GM was neutralized by lower staff cost and overheads. NEST remains committed to sustaining volume led growth across categories, although 8% cost inflation and current commodity prices of coffee and cocoa can pressurize margins. NEST has reported a strong 13.6% sales growth in mega Cities, 13.7% in TC 2-6 and 9% in villages which shows the growth potential given low penetration. Prepared Dishes, Confectionary and Beverage growth 16.7%, 20.4% and 16.1% looks encouraging and we are confident of double digit growth in these categories. However, Milk products (42% of sales) has grown in single digits since 2014 and margin centric model in Dairy and high competition in both Dairy and Nutrition can be a drag.
We expect near term margin pressure to sustain given inflation in Palmoil, Coffee and cocoa. We estimate 12.2% PAT CAGR over CY21-24. Long term outlook is intact but expect back ended returns given rich valuations of 59.6xCY23 EPS. We maintain Accumulate rating with a TP of Rs 19,120 on DCF basis (Rs18,723 earlier).
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At 14:40 hrs Nestle India was quoting at Rs 18,128.15, up Rs 37.70, or 0.21 percent.
It has touched an intraday high of Rs 18,140.50 and an intraday low of Rs 17,782.65.
It was trading with volumes of 770 shares, compared to its thirty day average of 2,202 shares, a decrease of -65.03 percent.
In the previous trading session, the share closed up 0.17 percent or Rs 31.45 at Rs 18,090.45.
The share touched its 52-week high Rs 20,599.95 and 52-week low Rs 15,900.00 on 14 September, 2021 and 24 February, 2021, respectively.
Currently, it is trading 12 percent below its 52-week high and 14.01 percent above its 52-week low.
Market capitalisation stands at Rs 174,783.86 crore.