Nestle Q1 in line with estimates: Should investors buy, sell or hold?

Brokerage firms remain mixed on Nestle India after the FMCG major reported a 9.25 percent rise in profit to Rs 463.28 crore for the first quarter ended on March 31, 2019, but high commodity prices impacted margins.

The company, which follows a January-December financial year, had posted a profit of Rs 424.03 crore in the same period a year ago.

Nestle also announced plans to launch organic food products in the category “milk products and nutrition” in the coming months.

The total income in the quarter stood at Rs 3,076.14 crore. It was Rs 2,813.6 crore in the corresponding period last year, Nestle India said in a BSE filing. Export sales during the quarter dropped by 8.9 percent due to lower coffee exports to Turkey, it added.

Here’s what brokerages recommended on Nestle India post-March quarter results:

Morgan Stanley: Underweight| Target: Rs 8,400

Morgan Stanley maintained its underweight rating on Nestle India post-March quarter results with a target price of Rs 8,400.

Revenue, Operating Profit and Adjusted PAT were up 9 percent, 5 percent and 9 percent respectively compared to estimates of 12 percent, 9 percent, and 12 percent.

Margin contracted by 80 bps which was largely in-line with the estimate. Higher commodity prices affected gross margin, and higher other income drove adjusted the profit growth by 9 percent on a YoY basis.

Jefferies: Buy| Target: Rs 12,000

Jefferies maintained its buy rating on Nestle India post-March quarter results with a target price of Rs 12,000. The product launch and entry into new categories will help sustain growth, said the note.

The urban-heavy company is better-placed to navigate near-term headwinds. The recent stock price correction makes it risk-reward favourable for investors.

CLSA: Outperform| Target Rs 11,750

CLSA maintained its outperform rating on Nestle India with a target price of Rs 11,750. The company reported a decent domestic growth but weak margins. The domestic revenue growth of 10 percent was good amid weak macro.

The gross margin stood at a six-quarter low signalling input cost pressure. And, a weaker margin led EBITDA to miss estimates.

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