Brokerage HDFC Securities in a results update said moderation in in-home consumption categories will impact key brands but revival in OOH will support growth
SI Reporter |
Last Updated at February 17, 2021 11:03 IST
Shares of FMCG major Nestle India dipped 5 per cent to Rs 16,360 on the BSE in Wednesday’s trade after the firm’s December quarter numbers failed to meet Street’s expectations.
The company on Tuesday, after market hours, posted a 2.25 per cent year-on-year (YoY) rise in net profit to Rs 483.31 crore for the fourth quarter ended December. The company, which follows the January-December financial year, had posted a profit of Rs 472.64 crore in the same period a year ago.
Its revenue from operations increased 9 per cent YoY to Rs 3,432.58 crore from Rs 3,149.29 crore posted in the corresponding quarter last year. The maker of Maggi noodles also announced a dividend of Rs 65 per share.
“Total sales and domestic sales for the quarter increased by 9.2 per cent and 10.1 per cent, respectively. Domestic Sales growth is broad-based largely driven by volume and mix. Demand in out-of-Home (OOH) channel further improved in the quarter but continues to be impacted by Covid. Export Sales were lower by 7.7 per cent due to lower coffee exports,” the company informed in a press release.
Following the results, most brokerages held ‘Hold’ or ‘Reduce’ recommendation on the stock.
“We maintain our EPS estimate for CY21E/CY22E. We value Nestle at 55x P/E on CY22E EPS to derive a TP of Rs 16,326. The stock is trading at 58x P/E on CY22E EPS and limits absolute upside in the medium term, making the risk-reward unattractive,” it added. The brokerage has a ‘Reduce’ rating on the stock with a target price of Rs 16,326.
Kotak Institutional Equities, which too has a similar rating on the stock, said that Covid-led lockdowns and confined living have triggered a rise in penetration and product trials and it can potentially drive higher consumption/adoption of packaged foods.
Nestle’s strong brand equity and product portfolio positions it well to benefit from any tailwinds, it further said, adding that the stock, however, is fairly valued. It trimmed its CY2021-22E EPS by 1-2 per cent and revised fair value to Rs 17,150 from Rs 17,500 earlier.
Meanwhile, brokerage ICICI Securities held a ‘Hold’ rating on the stock but cut its earnings estimates by 4 per cent; modelling revenue/EBITDA/PAT CAGR of 15/18/21 per cent, respectively, over CY20-23E.
At 10.55 am, shares of the firm were trading 2.76 per cent lower at Rs 16746.35 per share on the BSE. At the same time, BSE Sensex was down 0.45 per cent at 51,868.19.
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