Analysts at Jefferies expect revenue growth of Nestle India to sustain as it introduces new products. The brokerage raised its target price by 19% and opined that ‘current expensive valuations will sustain due to strong earnings momentum’.
Nestle India stock rallied close to 7% during the day trade on Friday to hit a fresh life-time high of Rs 9,609.55 on BSE as robust profit margins in the March quarter and the introduction of breakfast-cereal products boosted investor sentiment. The stock closed at Rs 9,506.60, up 5.8%. The rally in the stock also reinforced its third position among the top FMCG companies after ITC and HUL in terms of market capitalisation. The company had briefly lost its market capitalisation rank to Godrej Consumer Products (GCPL) in May last year. At Friday’s close, Nestle India commands a market capitalisation of Rs 91,659 crore, which is Rs 18,167 crore higher than that of GCPL.
The local entity of the Swiss Food giant Thursday reported a 38.2% increase in net profit for the quarter ended March 2018, backed by softer raw materials and other expenses. The input costs for the quarter declined due to lower commodity prices, mainly milk and related solid products. With Friday’s gain, the stock has clocked a gain of 21.2% since the beginning of 2018. In contrast, the benchmark Sensex yielded a return of 4.3% during the same period. Analysts were quick to revise their target price on the stock. Brokerages including Citi, CLSA and Jefferies raised their target price on the stock post the March quarter outcome.
Citi, which upgraded the stock from sell to buy stated, “We view positively Nestle’s foray into breakfast cereals and strong results, driven by better profit margins.” The brokerage expects an EPS increase of 19% annually in 2017-2020 period. Nestle India’s growth for the quarter is “backed by broad volume based growth across categories. This is in line with our strategy of broad based growth through increased penetration,” said its chairman and managing director Suresh Narayanan in a statement. The board also declared an interim dividend of Rs 20 per equity share for 2018 amounting to Rs 1,92.83 crore.
Analysts at Jefferies expect revenue growth of Nestle India to sustain as it introduces new products. The brokerage raised its target price by 19% and opined that ‘current expensive valuations will sustain due to strong earnings momentum’. As of Friday, 72.2% of the 36 analysts that track Nestle India had a buy recommendation on the stock, with Credit Suisse having a one year price target of Rs 11,000 per share, compared to the closing price of Rs 9,506.60. Over 2.22 lakh shares of Nestle India were traded on BSE and NSE, which is three-and-a-half times higher than the six month average volume at the counters.