Nestle India scales fresh record high; stock rallies 38% in 4 weeks

Shares of Nestle India surged 3.5 per cent and hit a new high of Rs 17,925 on the BSE on Thursday with its market capitalisation crossing Rs 1.7 trillion-mark on the BSE. The fast moving consumer goods (FMCG) company surpassed its previous high of Rs 17,521 hit on April 8, 2020.

Nestle India, the manufacture of food and beverage products, has seen its market price soaring 38 per cent in the past four weeks after Prime Minister Narendra Modi, on March 24, declared a nationwide lockdown in the wake of the Covid-19 pandemic. In comparison, the S&P BSE Sensex was up 8 per cent, while the S&P BSE FMCG index has gained 25 per cent during the period.

Nestle India, a part of a bunch of manufacturers that are allowed to operate during the lockdown, will see limited impact due to a healthy demand for packaged foods, according to analysts. It has been the only company in the consumer staples' segment to report double-digit domestic sales growth in the recent quarters (9 consecutive quarters) despite demand slowdown.

Analysts at Spark Capital expect Nestle India’s revenue to grow 5 per cent year-on-year (y-o-y) in the March quarter (Q1CY20) led by robust growth in Maggi portfolio and decent growth in nutrition segment.

“Despite a mid-single-digit volume growth, operating margins are expected to contract by more than 100bps due to price inflation of most agri commodities. Lower other income due to contraction of treasury book on account of capex and special dividend payment to result in 4 per cent decline in profit before tax (PBT),” the brokerage firm said in its March quarter results preview report.

At 01:28 pm, Nestle India was trading 3 per cent high at Rs 17,861 on the BSE. The market capitalisation on the company stood at Rs 1.72 trillion, exchange data shows. A combined around 150,000 shares have changed hands on the counter on the NSE and BSE till the time of writing of this report.