The move to include the pet care business in the (Indian) listed entity cements Nestlé India as the singular vehicle for future opportunities. Besides, introduction of Gerber brand (nutrition range for toddlers) and premium brand highlights the confidence on market maturity/readiness.
Good revenue performance (+16% YoY) for the second quarter of calendar year 2022 has benefits of continued deeper expansion in lower tier towns and villages, portfolio being better insulated to overall market slowdown and inflationary RM-led price increases (resilient volume growth of 7.9%). While execution on growth pillars continues, we see some near-term (increased) challenges due to inflationary raw materials.
We believe the Street will again appreciate the volume-based outperformance which Nestlé is witnessing. We maintain ‘add’ with a revised target price of Rs 20,500.