Nestle India shares decline 5% as December quarter results disappoint

Shares of FMCG major dipped 5 per cent to Rs 16,360 on the BSE in Wednesday’s trade after the firm’s December quarter numbers failed to meet Street’s expectations.

The company on Tuesday, after market hours, posted a 2.25 per cent year-on-year (YoY) rise in net profit to Rs 483.31 crore for the fourth quarter ended December. The company, which follows the January-December financial year, had posted a profit of Rs 472.64 crore in the same period a year ago.

Its revenue from operations increased 9 per cent YoY to Rs 3,432.58 crore from Rs 3,149.29 crore posted in the corresponding quarter last year. The maker of Maggi noodles also announced a of Rs 65 per share.

“Total sales and domestic sales for the quarter increased by 9.2 per cent and 10.1 per cent, respectively. Domestic Sales growth is broad-based largely driven by volume and mix. Demand in out-of-Home (OOH) channel further improved in the quarter but continues to be impacted by Covid. Export Sales were lower by 7.7 per cent due to lower coffee exports,” the company informed in a press release.

Following the results, most brokerages held ‘Hold’ or ‘Reduce’ recommendation on the stock.

Brokerage in a update said moderation in in-home consumption categories will impact key brands but revival in OOH will support growth.

“We maintain our EPS estimate for CY21E/CY22E. We value Nestle at 55x P/E on CY22E EPS to derive a TP of Rs 16,326. The stock is trading at 58x P/E on CY22E EPS and limits absolute upside in the medium term, making the risk-reward unattractive,” it added. The brokerage has a ‘Reduce’ rating on the stock with a target price of Rs 16,326.

Kotak Institutional Equities, which too has a similar rating on the stock, said that Covid-led lockdowns and confined living have triggered a rise in penetration and product trials and it can potentially drive higher consumption/adoption of packaged foods.

Nestle’s strong brand equity and product portfolio positions it well to benefit from any tailwinds, it further said, adding that the stock, however, is fairly valued. It trimmed its CY2021-22E EPS by 1-2 per cent and revised fair value to Rs 17,150 from Rs 17,500 earlier.

Meanwhile, brokerage held a ‘Hold’ rating on the stock but cut its earnings estimates by 4 per cent; modelling revenue/EBITDA/PAT CAGR of 15/18/21 per cent, respectively, over CY20-23E.

At 10.55 am, shares of the firm were trading 2.76 per cent lower at Rs 16746.35 per share on the BSE. At the same time, BSE Sensex was down 0.45 per cent at 51,868.19.

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.

We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

Source link