Nestle’s Q2 earnings beat Street’s estimates. Should you buy stock?


After FMCG major Nestle India June quarter earnings beat Street’s expectations, US brokerage Jefferies recommended a ‘Hold’ on expensive valuations, while Nuvama and ICICI Securities recommended a ‘Buy’ and ‘Add’, respectively. Motilal Oswal has a ‘Neutral’ stance on the counter.

The stock on Friday fell to the day’s low of Rs 22,187.30 on the NSE, down by 0.60% following its Q2CY23 earnings.

On Thursday the company reported a net profit of Rs 698.34 crore for the quarter ended June 2023, which was up 37% year-on-year (YoY) over Rs 510.24 crore reported by the company in the corresponding quarter of the previous financial year. The net profit was seen rising nearly 36% YoY to Rs 698 crore, according to the average of estimates given by 10 brokerages.

Total sales for the said quarter stood 15% YoY to Rs 4,619.5 while domestic sales grew by 14.6% between April and June.

Look, what brokerages are saying on the stock:

Jefferies: Hold | Target: Rs 19,900
Jefferies recommended a ‘Hold’ on Nestle India for a price target of Rs 19,900. The company witnessed a volume miss offset by margin expansion, the brokerage noted. Revenue growth was broad-based across cities and towns and also product segments. Like the packaged food story, but valuations are expensive, it said.

Nuvama: Buy | Target: Rs 25,810
Nuvama recommended a ‘Buy’ on the FMCG heavyweight with a price target of Rs 25,810. Nestlé’s Q2CY23 revenue grew as per the estimates of Nuvama while EBITDA/PAT growth was ahead of estimates. This is the fifth consecutive quarter of double-digit growth across all product groups and the company did well in both urban and rural pockets aided by proactive steps, the brokerage said.

Nestle will be opening its tenth factory in India at Odisha, showing confidence in long-term growth. “We roll forward to Q2CY25E, yielding a revised target price of Rs 25,810 from earlier Rs 24,965,” the brokerage said, calling Nestle one of its top picks.

ICICI Securities: Add | Target: Rs 24,500
In ICICI Securities’ opinion, Nestle is likely to witness industry-leading sales-driven growth as they have plans to aggressively expand their distribution. The brokerage maintains an ‘Add’ for an unchanged target price of Rs 24,500.

Motilal Oswal: Neutral | Target: Rs 22,465
Moswal remains ‘Neutral’ on the counter, estimating a 1% upside over the Thursday closing price of Rs 22,329. It put the price target at Rs 22,465. Nestle’s 2QCY23 results were broadly in line with its expectations. It delivered double-digit growth across all products, led by a better mix, healthy volume, and better pricing, along with rapid acceleration in the out-of-home (OOH) business during the quarter.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)


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