Should you buy, sell or hold Nestle India post Q4 results?
Shares of Nestle India traded 3.42% lower at Rs 16,633.85 at around 10.20 am (IST), while the benchmark BSE Sensex traded 0.58% down at 51,811 at around the same time.
Analysts retained their positive views on Nestle India after the company reported a 2.25% growth in net profit at 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 year-ago period.
Shares of Nestle India traded 3.42% lower at Rs 16,633.85 at around 10.20 am (IST).
Brokerage YES Securities retained ‘Add’ call on Nestle India with a price target of Rs 18,232. “While this muted performance can lead to some correction in the near‐term given possibility of some earnings downgrades, it still remains one of our top picks in the staples space given volume growth and premiumisation potential of its categories, opportunities for further deepening distribution and aggression on new launches and marketing spends,” the brokerage said.
Sales of the company increased by 9.16% to Rs 3,417.52 crore during the quarter under review as against Rs 3,130.74 crore in the corresponding period last fiscal, the company said.
Nestle India’s domestic sales were up 10.13% to Rs 3,260.70 crore as against Rs 2,960.78 crore in October-December 2019. Export sales dipped 7.73% to Rs 156.82 crore, compared to Rs 169.96 crore earlier. Total expenses increased 8.26% to Rs 2,793.01 crore from Rs 2,579.89 crore.
Commenting on the valuations, YES Securities said, “ The stock is currently trading at 57x CY22E earnings and we would review our estimates post the investor meet scheduled on February 26. For now, we reiterate our ‘Add’ rating.”
On the other hand, Motilal Oswal Financial Services retained ‘Neutral’ rating on the FMCG major with a target of Rs 17,500.
“Nestle’s Q4CY20 sales were in line with our expectations. While gross profit was in line, there was a miss at the EBITDA and PAT level, largely attributed to higher marketing costs in Q4CY20. This is actually a positive going forward as it indicates the management’s confidence in its growth prospects. Nestle doesn’t disclose advertising spends separately in its quarterly earnings. While the structural investment case is strong, valuations of 59x CY22 EPS do not offer any material upside potential from a one-year perspective,” Motilal Oswal said.