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Nestle – Robust Outlook backed by Maggi

November 24, 2009

Nestle ChocolatesNestle India’s outlook remains robust on the back of its star performing brand – Maggi which is now contributing between 25% to 35% of total sales. Nestle is favorably placed to benefit from the structurally strong demand conditions in semi-urban and rural areas.

New Product Pipeline:
Nestle’s topline growth of 18-20% to be sustained led by high single digit vol growth. Focus on low unit price pack & enhanced distribution continues to expand its customer base. Its exports, institutional accounts and out-of-home segments should revive with pick up in eco.

Financial & Earnings:
Nestle should maintain healthy 28% EPS CAGR over CY09-11E led by robust 19% sales growth and a healthy 140bp margin gain over this period. BOFA Merrill expects its EPS to be Rs 92 and Rs 114 for Dec-2010 and Dec-2011 respectively. IIFL / 5Paisa expects similar EPS as reported by Merrill.

Nestle should maintain healthy 28% EPS CAGR over CY09-11E led by robust 19% sales growth and a healthy 140bp margin gain over this period.

Kotak is more conservative in its EPS estimate of Rs 78 for Dec-2010 and has set a target price of Rs 3,000.

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