Buy Nestle India, target of Rs 1800: IIFL
IIFL has recommended a buy rating on Nestle India with a price target of Rs 1800 in its March 9, 2009 research report. “Nestle’s earnings growth of 29% in 4QCY08 was significantly ahead of our estimate. Sales growth was broadly in line with estimates at 22%, driven by a robust 25% growth in the domestic FMCG business, while exports declined by 10%. This is the 9th consecutive quarter of strong sales growth. EBITDA margin expanded by 188bps YoY, thanks mainly to a 174bps YoY reduction in ‘other expenses’ as proportion of sales, as operating leverage from sustained rapid growth kicked in.”
“Raw-material cost, surprisingly, dropped 45bps YoY owing to a combination of price hikes and other cost optimisation measures, though prices of key inputs like milk, wheat and sugar remained high. We believe Nestle’s presence in high-growth categories, its dominant marketshare and the strong line-up of new products launched in 2008 will help sustain 18-20% growth in CY09 and CY10. Buy, target price of Rs 1800,” says IIFL’s research report.
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