Accumulate Stock Of Maggie Parent Company, Robust Sales Growth, Offers Rs. 120 Dividend: Prabhudas Lilladher

Top brokerage firm Prabhudas Lilladher has given an accumulate rating to the stock of Nestle. The board declares 2nd interim dividend of Rs. 120/share. The company's total dividend for 9MCY22 aggregates to Rs. 145/share.

Stock To Accumulate: Target Price

The Current Market Price (CMP) of Nestle is around Rs. 19550. Prabhudas Lilladher has estimated a Target Price for the stock at Rs. 20178. This stock has the potential to give a 3% return, in the upcoming 1 year. It is a large-cap stock with a market capitalization of around Rs. 194,116 crore.

Stock Outlook
Current Market Price (CMP)	Rs. 19550
Target Price	Rs. 20178
Potential Upside	3.21%
52-week high share price	Rs. 21,050
52-week low share price	Rs. 16,000

Strong earnings

Revenues grew by 18.2% YoY to Rs. 45.9bn with domestic/export sales up by 18.3%/ 15.7%. Gross margins contracted by 292bps YoY to 52.8% impacted by higher commodity pries in edible oil, milk and its derivatives and packaging materials. EBITDA grew by 6.8% YoY to Rs. 10.2bn; Margins contracted by 238bps YoY to 22.1%. Lower employee cost (90bps) as a % of sales helped to partially offset the raw material pressure while other expenses were higher (40bps) due to increase in fuel prices. Adjusted PAT grew by 8.5% YoY to Rs. 6.7bn.

Stock Upside

Reiterating the buy rating, Prabhudas Lilladher said, "We expect sequential margins improvement from 4QCY22 as high cost inventory would have been utilized during the quarter. Launch of D2C platform - www.mynestle.in will further accelerate digital sales contribution over the medium term. We have an Accumulate rating on the stock with a target price of Rs. 20178. The stock currently trades at 64.4x/56.5x CY23/24 EPS."

Business growth

Domestic sales growth of Nestle is broad based and driven by strong volumes and improved mix across categories. Growth has been very strong in urban (large metros & mega cities) and continued to be robust in smaller towns (incl rural markets). E-commerce channel contributed 7.2% of domestic sales. Witnessing early signs of price stability in edible oils and packaging materials. Milk, fuels, grains and green coffee costs are expected to remain firm with increase in demand & volatility. Launch of D2C platform - www.mynestle.in in Delhi NCR with gradual expansion across other parts of the country.

Category Performance:

Prepared Dishes and Cooking category growth driven by MAGGI noodles aided by media and distribution expansion. Milk Products and Nutrition category continues to perform well with strong growth in MILKMAID. Confectionery category's strong performance continued led by aggressive media campaigns, festive executions, consumer promotions and focused distribution drives. Beverages category saw strong growth in NESCAFÉ CLASSIC, SUNRISE and vending mixes.

Disclaimer

The above stock was picked from the brokerage report of Prabhudas Lilladher. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.