Accumulate Nestle India; target of Rs 10742: Prabhudas Lilladher

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Prabhudas Lilladher's research report on Nestle India

We are cutting CY19 and CY20 EPS estimates of Nestle by 0.4% and 3.6% due as we believe that input costs led margin tailwinds are over. We now factor in120bps decline in gross margins in CY19 and 30bps in CY20. Nestlé's 1QCY19 nos show 10.2% domestic sales growth (12% in 4Q18) in a challenging operating environment, showing success of new launches and volume focused strategy. We believe success of new launches and sustained innovation pipeline holds key to growth sustenance.

Outlook

We estimate 11.9% EBIDTA and 12.8% PAT CAGR over CY18-20 and value the stock at 46xMarch21 EPS and arrive at target price of Rs10742 (Rs10828 earlier). Retain Accumulate.

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