The shares of Nestle India, a food and beverage company known for its Maggi brand instant noodles in the Indian market, jumped nearly 23 times in the last 10 years due to consistent performance and market shares of key products.
Despite a six-month ban on Maggi in 2015 for high monosodium glutamate (MSG) and key ingredients, Nestle India gained strength and hit 149 percent in March 2016 at a rate of Rs 5,011 per shares.
In the last two years, from CY2016 to CY 2018, Nestle’s revenue has grown 22 percent, and net profit has jumped 73 percent.
In 2015, Nestle’s profit and topline declined by 52 percent and year-on-year (YoY), respectively, following the Maggi ban. On a reduced basis, the company’s profit has grown from 2015 to 2018 at 185 percent on a 38 percent increase in revenue. Nestlé follows the January – December financial year.
In the recent quarter ended June 2019, its profit and revenue increased by about 11 percent compared to the same period last year, while bottomline and top line growth was 10 percent in the first half of the current year.
Nestle has consistently delivered 10 straight quarters of growth led by volume and mix on the back of innovation and renewal, although environmental commodity prices continue to be challenged with headwinds and soft demand conditions, “Suresh Narayanan, Chairman and Managing Director he said.
Continued performance has helped Nestle India gain a spot on the National Stock Exchange’s benchmark index Nifty 50 from 27 September.
After a spectacular rally and addition to the Nifty 50, the question is, is it still worth investor attention? Analysts are optimistic about the company’s growth prospects.
“Going forward, we expect Nestle’s revenues to remain buoyant owing to the continued focus on innovating and renovating its brands, new launches in nutrition segment and emphasis on expanding penetration through expansion in the distribution cycle,” Vineeta Sharma, Head of Research, Narnolia Financial Advisors said.
The decline because of higher input prices can be predicted by changes in product mix and prudent pricing.
“We continue to maintain a positive outlook on Nestle. After joining the Nifty, liquidity will also drive up the stock price as the weight of consumer staples increases from 8.5 percent to about 10 percent. Our 12-month run for the company. The target is Rs 13,742,” he added.
Prashant Tapes of AVP Research, Mehta Equities, said that despite a slowdown in various sectors of the economy, the overall outlook on Nestlé’s growth remains optimistic.
They believe fast-growing consumer goods (FMCG) companies have emerged as a haven for investors and remain a safe bet in recessionary seasons, with steady and steady growth in revenue and profits.
He added, “About inclusion of Nestle in the Nifty index, we run it shoulder to shoulder as a better low volatility counter on which eligibility criteria for inclusion of stocks in Nifty index as per NSE revision methodology Completion may be considered.
He is positive on Nestle’s long-term growth prospects and advises investors to add at current levels to long-term portfolios as they believe Nestle will continue to strengthen its presence by increasing market shares, expanding distribution reach in rural areas. And they are introducing urban areas, premium and innovative products, steady capacity growth, and improved product mix.
CapitalAM’s research head Romesh Tiwari said the stock is moving actively and with this momentum, it is likely to reach 12,950 levels.
“I would recommend traders to keep up with a stop loss of 11,964 on this stock, but there will be no new purchases at this level. Investors should wait for the 11,500 level to buy at Nestle for the short term.
Initially, in August, Nestlé said it would soon begin construction of its new and ninth factory in India, in Sanand, Gujarat.
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