Nestle India – Healthy Food, but High Valuations

  • Date: 02nd Sept 2021
  • CMP: ₹19,950
  • Industry: Food & Beverages
  • Large Cap: ₹1,88,000  cr. mkt cap
  • P/E:  82.46 times and P/B: 88 times
  • HOLD with a Jan’24 target of ₹26,400, a 33% gain in 2.5 years.

Summary

  • About Nestle: in India since 1912, Nestle has brands like Cerelac, Nescafe, Maggi, Milkybar, Kit Kat, Bar-One, Milkmaid and Nestea. With 8 mfg. locations, it primarily makes products in house. The premium products are widely distributed. Nestle revenue in CY20 was ₹13,290 cr. & profits ₹2,082 cr. Revenues, EBITDA and PAT have grown at 10%, 12.2% & 12.6% CAGR over 8 years. Nestle is investing in capex of ₹2,600 cr. over the next 3-4 years, to augment capacities and locations. Innovation is impressive with several launches planned.
  • Risks: 1) High valuations 2) intense competition 3) regulatory challenges 4) raw material price volatility 5) a new event like the ‘Maggie crises’.
  • Opinion: Given high valuations, we suggest HOLD with a target of ₹26,431 by Jan’24, a 33% gain.

The Investment research report is available for download, do read our insightful research in PDF format here.

Disclaimer

This document has been prepared by JainMatrix Investments Bangalore (JM), and is meant for use by the recipient only as information and is not for circulation. This document is not to be reported or copied or made available to others without prior permission of JM. It should not be considered or taken as an offer to sell or a solicitation to buy or sell any security. The information contained in this report has been obtained from sources that are considered to be reliable. However, JM has not independently verified the accuracy or completeness of the same. The basis for Target Price is a target P/E of 77.5 times, management commentary and analyst judgement. Punit Jain has no position or shareholding in Nestle India. In addition, JM has no known financial interests in Nestle India or any related group. Neither JM nor any of its affiliates, its directors or its employees accepts any responsibility of whatsoever nature for the information, statements and opinion given, made available or expressed herein or for any omission therein. Recipients of this report should be aware that past performance is not necessarily a guide to future performance and value of Investments can go down as well. The suitability or otherwise of any Investments will depend upon the recipient’s particular circumstances and, in case of doubt, advice should be sought from an Investment Advisor. Punit Jain is a registered Research Analyst under SEBI (Research Analysts) Regulations, 2014. JM has been publishing equity research reports since Nov 2012. Any questions should be directed to the director of JainMatrix Investments at punit.jain@jainmatrix.com.

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