Thus far in the calendar year 2020, Nestle India
has outperformed the market by surging 18 per cent, as compared to a 24 per cent decline in the S&P BSE Sensex till Tuesday.
Analysts at Prabhudas Lilladher believe softening of input costs in milk, sugar and palmoil will reduce gross margin pressure, but lower other income will curtail EPS CAGR at 11.6 per cent over CY20-23 despite 2 per cent upgrade in EPS.
"Although Nestle India
is better placed to face any impact from slowdown in rural demand due to lower exposure (25 per cent), structural concerns on low growth in Infant Nutrition and Beverages, accounting for nearly 36 per cent of sales, remain. Strong parentage, brands and market leadership in key categories are positive, but valuations at 66.5 times March 2022 EPS force us to retain REDUCE rating," the brokerage firm said in its result update report.
On the other hand, for Motilal Oswal Financial Services, the longer-term narrative on Nestle India’s top line and earnings growth remains extremely attractive. "Not only the successful implementation of its growth strategy in recent years is a positive, but also the packaged food segment in India offers immense growth opportunities, particularly for a company with strong pedigree and distribution strength,” analysts at the brokerage said in result update.
At 11:07 am, Nestle India was trading 3.5 per cent lower at Rs 16,840 on the BSE, as against a 2.4 per cent rise in the S&P BSE Sensex. A combined around 270,000 shares have changed hands on the counter on the NSE and BSE till the time of writing of this report.