Nestle India Q1CY23 results: Here’s what brokerages say; check details

The net profit for Q1CY23 stood at ₹736 crore as against ₹590 crore as reported a year earlier. The company in an exchange filing said that it reported a 21% increase in operating revenue to reach ₹4,830.53 crore. The company generated revenue from operations of ₹3,992.6 crore during the corresponding period last year.

The manufacturer of Maggi noodles claimed double digit growth across all product categories, which was backed by a broad increase in both urban and rural markets. Volumes increased by 11% throughout the quarter.

On Wednesday’s trade, shares of the company trading near its 52-week high levels recorded October 24, 2022. The stock price surged 15% and outperformed its sector by 3.3% in the past year.

“It has marked fresh new high, crossing October 2022 swing high, overall bias is positive. 20,500 is the support level and 21,800 is the resistance level,” said Rajesh Bhosale – Equity Technical and Derivative Analyst, Angel One.

Shares of Nestle India on Wednesday’s closed 1.8% higher at ₹21,026.25 per share.

Let’s look at what the brokerages have to say about the company’s Q1CY23 performance.

Nuvama Institutional Equities

Brokerage house believes that the company has had an fabulous start to the year.

The revenue climbed by 21% year onyear (YoY) in Q1CY23, which was the highest percentage over the previous ten years. EBITDA/PAT climbed by 19%/24%, which was greater than both the brokerages’ and the market’s average estimates. Without taking into account the effect of Maggi tiny packs, volume growth is 11% YoY. All goods saw double-digit sales growth. Rural growth was volume-driven. Due to price increases in dairy and coffee, gross/EBITDA margins decreased by 159 basis points/40 basis points year over year (YoY).

“We expect growth momentum to sustain as Nestlé continues to expand portfolio (launched ThickenUp Clear, a food and beverage thickener from Nestlé Health Science portfolio) and distribution. We roll-forward to Q1CY25E with a revised target price of ₹24,965 (earlier ₹23,435). We maintain ‘buy’ rating,” said the brokerage.

The brokerage also claimed that the company will profit from the softening of packaging materials and edibleoils. Fresh milk and green coffee prices, however, are anticipated to stay stable. Quick commerce, out-of-home (OOH), and e-commerce are expected to perform strongly.

Motilal Oswal

The brokerage in its in report said that its a big beat by the company in a challenging environment.

“The company’s 1QCY23 numbers beat our expectations on all parameters, with overall sales growth of 21% versus our estimate of 9%. It was driven by double-digit growth across product categories, led by a better mix, healthy volume and better pricing, along with rapid acceleration in the OOH business during the quarter,” said the brokerage in its report.

The brokerage claims that there have been no significant adjustments to its CY23 and CY24 EPS predictions. The long-term growth story for revenue and earnings is attractive. In India, the packaged food market has enormous potential for expansion. This is especially true for a business like NEST, which has a solid history and distribution capabilities. Additionally, execution confidence is given by the recent success of its volume-led growth approach.

“The company’s valuation at 57.6 times CY24E price-to-earnings (P/E) is expensive and does not offer any significant upside from a one-year perspective. We value the company at 55 times March 25E earnings per share (EPS) to arrive at our target price of ₹20,500. We reiterate our ‘Neutral’ rating on the stock,” said the brokerage.