IDBI Capital
Nestle India (Hold)
Target: ₹19,007
CMP: ₹19,273.7
Nestle India Q3CY21 result has been in-line with our estimates. Revenue continued its double-digit growth momentum on a high base of 10 per cent y-o-y. Organised trade recorded strong recovery with revenue growth at mid-twenties after a muted second quarter due to Covid-induced lockdowns.
Revenue growth in both metros and small towns stood at high double digit. Maggi Noodles and Maggi Masalaae Magic posted healthy growth while Maggi Sauces reported muted growth due to decreased in home consumption, high base and increased competitive intensity.
Milk Products and Nutrition (toddler range and milk made), confectionary (power brands, Kitkat, Munch, Milkybar) and Beverage (Nescafe) grew at double digit. Gross margin contracted for the first time after 4 consecutive expansions due to high input cost. Input prices are likely to remain firm.
We value Nestle at 60x CY23 EPS. Our revised target price stands at ₹19,007. We upgrade our rating to ‘Hold’.
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