Why Brokerages See Higher Sales For Nestle India In Near Term

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Most analysts expect an increase in in-home consumption of packaged goods and ready-to-cook products amid fresh curbs to fight the renewed wave of Covid-19 infections to boost near-term sales of Nestle India Ltd.

The maker of Maggi instant noodles and Nescafé coffee saw its domestic sales rise 10.2% year-on-year in the quarter ended March. The company, which follows January-December fiscal, posted a 15% increase in net profit over the year earlier at Rs 602.2 crore during the reported quarter.

Its revenue rose 9% to Rs 3,610.8 crore, against the Rs 3,636.5-crore consensus forecast of analysts tracked by Bloomberg.

According to Nomura, Nestle India’s two-year revenue compounded annual growth rate continues to be in double-digits, and will likely be one of the highest among peers. Demand in out-of-home channels continues to improve quarter-on-quarter, but remained constrained due to the ongoing second wave of the pandemic.

Emkay Global agreed. While the recent lockdowns across the country are likely to impact the company’s near-term growth, its categories are likely to be resilient, offering better growth versus peers.

Brokerages maintained their ‘buy’ or ‘hold’ call for Nestle India but said it’s trading at higher valuations than peers. Of the 43 analysts covering the stock, 21 have a ‘buy’ rating, 17 suggest a ‘hold’ and five recommend a ‘sell’, according to Bloomberg data. The average of the 12-month consensus price targets implies an upside of 4.7%.

Shares of Nestle India dropped as much as 1.74% to Rs 16,799 as of 9:45 a.m. on Thursday compared with 0.6% fall in the Nifty 50.

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