Nestle India stock update!

Last updated: 17 Feb, 2021 | 09:04 am

Nestle India stock update!

Nestle India shares declined by nearly 3% on Wednesday, after the company’s Oct- Dec 20 earnings missed estimates.

Highlights from quarterly results

Profit below estimates: Nestle India has reported a 2% on-year rise in net profit to Rs 483 crore in Oct-Dec 20 period, missing street estimates. Analysts had earlier estimated a net profit of about Rs 563 crore. The bottomline was impacted by a rise in total expenses. Total expenses rose 8.3% on-year to Rs 2,793 crore.

Revenue rises: Revenue rose 9% on-year to Rs 3,432.6 crore, against Rs 3,500 crore estimated by analysts. The revenue growth was mainly driven by domestic sales that increased 10.1% to Rs 3,260.7 crore, even as the company’s exports declined 7.7% to Rs 156.82 crore in the period, due to lower coffee exports. Demand in the Out of Home channel was impacted throughout the year due to COVID.

Key brands post double-digit growth: Nearly two thirds of Nestle India’s key brands like MAGGI Noodles, KITKAT and NESCAFÉ Classic posted double digit growth last year. This was backed by a step up in marketing spends, especially in the last quarter. E-commerce continued to grow, contributing 3.7% of domestic sales. The company said that the demand in Out of Home channels has continued to improve, sequentially over quarters and it remains confident of its recovery.

Dividend: Nestle India has announced a final dividend of Rs 65 for the calendar year Jan-Dec 20. The total dividend for 2020 aggregates to INR 200 per share, which includes one interim dividend of INR 135 per share paid on 20 November 2020.

Reaction by brokerages

  • Following the results, Credit Suisse has downgraded the stock to ‘Neutral’ with a target price of Rs 17,800. The firm noted that while there was a steady double-digit growth, there is limited room for a surprise going ahead. The company has cut earnings estimates for CY21/22 by 3-4%, while remaining positive on the company’s long-term prospects.
  • Jefferies has retained a ‘Hold’ rating on the stock with a target price of Rs 19,000. The higher tax rate led to near-flat earnings & caused an earnings miss, said Jefferies.

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