Nestle hits 52-week high on strong Dec quarter result, dividend bounty

Shares of Nestle India advanced 2 per cent to hit fresh 52-week high of Rs 16,753.45 on the BSE on Friday after the packaged food firm staged an impressive December quarter show. That apart, the company also recommended a final dividend of Rs 61 per equity share for the year 2019.

The company's net profit rose 38.4 per cent year-on-year (YoY) to Rs 473.02 crore during the recently concluded quarter, helped by volume growth. The company, which follows January-December financial year, had posted a net profit of Rs 341.76 crore in the corresponding quarter a year ago. Nestle India’s margins for the quarter came in at 21.5 per cent compared with 19 per cent a year ago.

“We have delivered broad-based volume and mix-led growth. This is a trend that we have demonstrated consistently in the recent years. Maggi Noodles, KitKat, Nestle Munch, Ceregrow, Maggi Masala-ae-Magic, Nescafe and Nangrow delivered strong performances during the year," said Suresh Narayanan, chairman and managing director, Nestle.

Meanwhile, net sales rose 8.75 per cent to Rs 3,130.74 crore as against Rs 2,878.83 crore reported in the corresponding quarter last year. Among this, the domestic sales rose 10.04 per cent to Rs 2,960.78 crore relative to Rs 2,690.51 crore in October-December 2018. Exports, however, declined 9.74 per cent to Rs 169.96 crore. Furthermore, the company’s profit before tax (PBT) rose to Rs 614.6 crore from Rs 522 crore. 

"The longer-term narrative on top-line and earnings growth remains extremely attractive not just because of successful implementation of growth strategy in recent years but also because of the packaged food segment in India offering immense growth opportunities, particularly for a company with a strong pedigree and distribution strength. However, current valuations of 58.1x CY21E EPS and 48.6x CY22E EPS appear to be completely factoring in the upside for the next one year," wrote analysts at Motilal Oswal Financial Services in a results review note. The brokerage firm, which values Nestle India at 55x Mar’22E EPS, maintain "neutral" stance on the stock with a target price of Rs 15,500. 

Additionally, the company's Board recommended a final dividend of Rs 61 for the year 2019.  The final dividend, if approved by the shareholders at 61s1 AGM, shall be paid on and from May 28, 2020, it added. 

On the managerial front, the Board recommended to re-appoint Suresh Narayanan as the Managing Director with effect from August 1, 2020 for another term of five years, and appoint David McDaniel, as 'Executive Director - Finance & Control and Chief Financial Officer" with effect from March 1, 2020, for a term of five years.

At 10:19 am, the stock was trading 0.5 per cent higher at Rs 16,500, as against a 0.17 per cent gain in the S&P BSE Sensex.