Revenue rose 9% to Rs 5,268 crore, up from Rs 4,831 crore, the FMCG major said in a regulatory filing.
The company has also informed the exchanges about changing the financial year from “1st January – 31st December” cycle to “1st April – 31st March” cycle. Accordingly, the current financial year of the company stands extended up to March 31, 2024, covering a period of 15 months commencing from January 1, 2023, to March 31, 2024, comprising five quarters.
Here’s what brokerages have to say about the stock performance:
Goldman Sachs
Goldman Sachs sees the March quarter as a strong one driven by margin expansion. They believe that gross margins may not sustain as input cost inflation is increasing. Nestle could benefit from Dr Reddy’s medical representative network to grow the business.
Goldman Sachs maintained a neutral rating on Nestle India but raised the target price to Rs 2,550 from Rs 2,500 earlier.
Motilal Oswal
The company has been building its strategy around its RURBAN concept. The distribution penetration has been benefiting Nestle India across most of its categories. Packaged food penetration has improved in the tier-2 and rural markets. The brokerage firm states that Nestle India’s portfolio is relatively safe from local competition and thus, the operating costs have not accelerated, unlike its FMCG peers. The brokerage firm believes the company will be able to sustain its EBITDA margin at 25% for FY25/FY26.
Motial Oswal reiterated their ‘neutral’ rating for the stock, downgrading the target price to Rs 2,400.
Kotak Institutional Equities
“Nestle India’s revenue/EBITDA growth of 9%/21% in the march quarter was slightly ahead of our estimates. The overall operating performance was decent in the context of weak consumption and the steep inflation seen in coffee prices. Nestle has launched two new businesses: Nutraceuticals JV with Dr Reddy’s and Nespresso’s entry into India. These forays hold LT promise but are unlikely to move the needle in the foreseeable future.”
With this, KIE rated Nestle India with a ‘buy’ call and a target price of Rs 2,550.
Emkay Global
Going ahead amid inflationary stress, the brokerage firm largely retains its estimates; they see FY25-26 topline & earnings CAGR at 11% each. Given that the positives are in the price, the stock offers little upside despite the generous valuations.
Emkay retained a ‘reduce’ rating for the stock with a target price of Rs 2,600.
ICICI Securities
ICICI Securities stated that their earnings estimate changes are not comparable due to the change from CY to FY for the company, modeling revenue / EBITDA / PAT CAGR of 10 / 11 / 11 (%) over FY24-26. The brokerage firm stated an upside risk of faster-than-anticipated recovery in the demand environment while the downside risk of higher-than-expected inflation in key raw material prices exists.
Recently, the stock price of Nestle India dipped aggressively after the multinational FMCG major was found adding sugar to baby food products sold in India but not in Europe and UK. The fall in shares of Nestle, regarded as a long-term compounding machine, was the worst single-day drop in the last 3 years.
Following the revelation, the health ministry was also said to be concerned about the issue.
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(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
