Foreign brokerage JP Morgan downgraded the stock to ‘Neutral’ from ‘Overweight’ on ‘unexciting’ December quarter results while also lowering margin expectations. This brokerage sees the stock at Rs 17,700. Credit Suisse has downgraded the scrip to ‘Neutral’ and has a target of Rs 17,800 on it. Jefferies also has downgraded the stock to ‘Hold’ with a target of Rs 19,000. CLSA has retained its ‘outperform’ rating on Nestle but has reduced its target to Rs 19,000 from Rs 19,400 earlier. HSBC, meanwhile, has maintained its ‘buy’ call on the stock with a target of Rs 20,000. The stock fell 5 per cent to hit a low of Rs 16,360 on BSE.
The FMCG giant reported a 2.25 per cent on-year rise in its net profit for the quarter ended December to Rs 483.3 crore. The company’s revenues in the quarter grew 9 per cent on a year-on-year (YoY) basis to Rs 3,432.6 crore.
Domestic sales growth was broad-based, largely driven by volume and product mix. Demand from out-of-home channels improved further in the quarter, but continues to be impacted by Covid-19, the company said.
“Domestic revenue growth was underwhelming given the stronger volume growth performance by most consumer staples companies in our coverage, barring Britannia. We believe that this is driven by a lower growth in the infant nutrition business – our primary research indicated likely lower birth rates in CY21, a potential headwind for the segment,” ICICI Securities said. This brokerage has a target of Rs 17,500 on the stock.
Emkay Global said Nestle did not see an acceleration in sales from September quarter level despite the economy opening up further. Some moderation in in-home snacking as highlighted by Britannia might have affected the numbers, it said.
“The growth for Nestle has been steady but slower than peers’ recently. Margin miss and rich valuations (56 times CY22) should limit near-term upsides. We retain Hold with a revised target of Rs 16,200, rolling forward to March 2023 EPS estimates,” Emkay said.
