The margins of Nestle India have been under pressure due to the material cast. Brokerage houses are also assuming that the outlook is better for the long term, but margins will remain under pressure in the near term.
Nestle India Stock Price: After the December quarter results, today Nestle shares are seeing flat trading. In today’s trading there has been ups and downs in the stock. It is trading today at a price of Rs 18150 after making a price of 17811. Whereas on Thursday the stock closed at Rs 18126. The profit of this Maggi maker has decreased in the December quarter. Margins have been under pressure due to material cast. Milk and nutrition business has been weak in comparison to other segments. Brokerage houses are also assuming that the outlook is better for the long term, but margins will remain under pressure in the near term. On the other hand, due to the high valuation of the stock, there is no scope for much upside in it at the moment.
share selling advice
Global brokerage house CLSA has given a sell rating on the stock and has given a target of Rs 17370. This current price is less than Rs 18126. The brokerage says that further pressure on the margins of the company may continue. A reduction of 2.26 percent in gross margin is possible. While the brokerage house Credit Suisse has given a target of Rs 20000 while giving the stock neutral rating. Brokerages are considering the pressure on margins as negative.
Share valuation higher
Brokerage house Motilal Oswal has also given a neutral rating on the stock and has given a target of Rs 19,400. The current price can bring 7 percent growth in the stock. The brokerage says that the company’s sales have been as per estimates, while volume growth is 9.6 per cent in CY21, which is impressive. But the segmental performance is mixed. Growth in milk and nutrition has been weak. There is an improvement in gross margin on a quarterly basis. But the material cost pressure may impact margins in the near term. The brokerage says that the long-term outlook is better but due to the high valuation of the stock right now, growth may remain limited in the near term.
long term view positive
Brokerage house ICICI Securities says that the domestic revenue growth of Nestle has been 9 percent year-on-year. There is a recovery in most of the company’s business, but the infant nutrition business has been weak. However, the company is getting the benefit of product availability and expansion in small towns and villages. On the other hand, due to inflationary RM, there will be some challenges in the near term.
However, the brokerage house has kept a positive long term view in the company. The company will benefit from increasing consumer interest in packaged food, continuous investment in brands, focus on distribution expansion and increase in capex. The brokerage has given a hold advice in the stock and has given a target of Rs 20,000. Whereas the current price is Rs 19,500.
Results at a glance
Nestle India’s December quarter profit fell 20 per cent year-on-year to Rs 386.6 crore as against Rs 483 crore in the same quarter a year ago. On a quarterly basis, it declined by 37.7 per cent. The company’s income grew 8.9 per cent year-on-year at Rs 3,739 crore. The company’s board has also announced a final dividend of Rs 65 per share at a face value of Rs 10.
(Disclaimer: Stock investment advice is given by the brokerage house. These are not the personal views of The Financial Express. Markets are risky, so take expert opinion before investing.)
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