Nestle: What Are Target Prices Of India's Seventh Most Costliest Stock Ahead Of 1:10 Stock Split?

To those investors who are looking to buy Nestle shares but can't because it is out of your budget, good news has arrived as the FMCG giant has declared the much-awaited record date for its 1:10 stock split. This means that 1 share of Nestle will be split into ten smaller shares of Nestle, making its share price more affordable. Nestle is currently India's seventh most costliest stock. But ahead of a stock split, brokerages have shown optimism in Nestle and have set target prices in the range of Rs 25,700 to Rs 28,500, indicating a potential upside of 6-16% from the current market price.

Nestle Stock Split:

The popular instant noodles brand Maggi maker has fixed January 5 as the record date for determining the entitlement of equity shareholders for sub-division/ split of existing equity shares.

The stock split is in the ratio of 1:10 --- which means that --- every 1 existing equity share having a face value of Rs 10 each will be sub-divided into 10 equity share shares having a face value of Re 1 each fully paid-up.

That being said, Nestle shares will turn ex-split on January 5 as well.

Some of the benefits of a stock split in general terms is that the corporate action makes a listed company's shares more accessible, and increases liquidity. This means that every 1 share of Nestle in your portfolio will be split into ten equity shares --- and this increases the amount of shares you hold in Nestle, and further makes it affordable for more buying for new and existing investors. And even though the face value of shares declines in proportion as per the split ratio, the movement does not have any impact on the company's share capital and reserves.

It also needs to be noted that this would be the first stock split by Nestle.

Nestle Share Price:

On December 18th, on BSE, the stock ended at Rs 24,356.20 apiece, marginally down. The company's market cap is at Rs 2,34,832.05 crore.

Nestle Dvidend:

Apart from the stock split, earlier in the current year, Nestle has paid in total dividends up to Rs 242 per share.

What do brokerages tell about Nestle share price ahead of stock split?

The latest to provide coverage on Nestle shares will be KR Choksey after its Q3 results. The brokerage's report said that Nestle has seen one of the higher growth rates among FMCG companies as it continues to benefit from distribution expansion, especially in rural India. The revenue growth is broad-based across segments and geographies. Further sustainability of growth is expected from innovation, higher capex plans coming on stream over the next couple of years, continued thrust on RURBAN strategy and higher media investments.

Also, KR's note said that Nestle reported strong margin performance in the quarter, and will continue to focus on profitability along with topline growth. Premiumization will also be an important driver of growth and profitability improvement.

KR believes that Nestle's stock price is likely to get a boost post the stock split, as higher liquidity and a lower price point per share will increase the shareholder base.

It added, "We revise our CY23E/ CY24E Adj. EPS by -0.9%/ +0.5%, respectively and introduce CY25E estimates. While NEST will shift to an April-March reporting year, we continue to build our estimates on a January-December year as of now for better comparability. We expect Revenue/ EBITDA/ Adj. PAT to grow at a CAGR of 13.0%/ 17.3%/ 18.2%, respectively over CY22-CY25E. The stock is currently trading at 75.7x/ 65.0x/ 58.0x our CY23E/ CY24E/ CY25E Adj. EPS. We apply P/E of 63.0x (66.0x earlier) as we roll over our valuation to CY25E EPS of Rs 414.5 and arrive at a target price of Rs 26,111 per share (Rs 24,300 earlier).." Accordingly, the brokerage maintained an "ACCUMULATE" recommendation on the shares of Nestle India.

Meanwhile, after Q3 results, BOB Capital Markets' report said that NEST continues to deliver a strong performance in domestic markets supported by high consumer engagement, product launches and upgrading to branded packs in small towns and large villages.

In BOBCAPS' view, the company is among the best positioned to benefit from the likely shift in demand from unbranded to branded packaged foods. NEST has committed Rs 50bn in capex over CY23-CY25 towards capacity creation for future growth, including a ~Rs 9 billion investment in a new Odisha factory. Moreover, it continues to step up innovation and has 10 products in the pipeline for the near future.

On the valuation, BOBCAPS note said " We retain BUY as we expect NEST to show sustained, profitable growth underpinned by investments in capacity creation, innovation, premiumisation, and direct reach expansion with a rural focus."

On the other hand, Geojit BNP Paribas has recommended a hold on Nestle shares for a target price of Rs 25,740.

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author or Greynium Information Technologies. The author, the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.