Nestle India’s shares dip after Q3 earnings; Brokerages weigh in
Nestle India Ltd.’s share price experienced a decline on Wednesday following the release of their third-quarter earnings. Concerns about inflation and a slowdown in urban markets contributed to this downturn. Several brokerages have adjusted their outlook on the stock, offering varied perspectives on the company’s future performance.
Nuvama, Anand Rathi, and Macquarie analyze Nestle’s Performance
Nuvama, while maintaining a ‘buy’ rating, lowered their target price for Nestle India’s stock. They cited the urban slowdown and ongoing inflation as key factors influencing their decision. Anand Rathi, on the other hand, maintained a ‘hold’ rating, while Macquarie held a ‘neutral’ stance. Despite the varied outlooks, these brokerages anticipate that Nestle’s growth will be supported by expanding business segments and increased e-commerce activity. Nirmal Bang also maintains it’s ‘Buy’ rating on Nestle’s stocks.
Nestle’s Position in the Indian Market
Nestle holds a strong position in urban India, where a large portion of the salaried class resides. As the urban slowdown begins to reverse, the company is expected to benefit significantly. Nestle has secured the top spot in the coffee [[market]], while maintaining a stable [[market]] share of up to 60% in noodles. They also lead in the baby food segment. Nestle has also experienced growth in wafer-based chocolates and holds the second position in single-serve breakfast cereals.
Impact of Inflation and E-commerce Growth
Due to rising coffee prices, Nestle implemented price increases of up to 2% in the coffee segment. Other categories like chocolates and prepared dishes have not seen such sharp price hikes yet. The company’s e-commerce segment has shown strong double-digit growth, contributing 9.1% to domestic sales. With the appointment of Manish Tiwary, who has experience at Unilever and Amazon, Nestle aims to further develop this channel.
Nestle’s Investments and Brokerage Targets
Nestle has been actively investing in India, with the latest addition being their tenth factory in Odisha. Their capital expenditure as a percentage of revenue has increased from 1.8% in 2015 to 7.7% in the 2024 financial year. Nuvama revised their target price for Nestle India to Rs 2,845, down from Rs 2,870. Macquarie, maintaining a ‘neutral’ rating, set their target price at Rs 2,250. They see potential in the premium [[market]] and anticipate a recovery from the current lows. While Nestle has expanded its reach using digital tools and rural-urban strategies, inflation has affected sales of milk and nutrition products.
Analyst Ratings and Share Performance
Nestle India’s share price dropped as much as 3.23% to Rs 2,225.25 on the NSE. It has seen a 2.72% increase over the past 12 months. Out of 38 analysts tracking the company, 12 recommend a ‘buy’, 19 suggest a ‘hold’, and seven advise a ‘sell’. The average 12-month target price is Rs 2,425.35, indicating a potential upside of 8.4%.
