Nestle India market cap crosses Rs 1-trillion; stock rises 50% from Feb low

Nestle India on Tuesday became the third listed fast moving consumer goods (FMCG) company to join the elite club of firms that have seen their market capitalisation (market cap) soar past the Rs 1 trillion mark.

With Rs 1.01 trillion market cap, Nestle India stands at 28th position in overall market-cap ranking at 11:23 am; the BSE data shows. The stock is trading at its all-time high level of Rs 10,450, up 2.4% in otherwise subdued market. The S&P BSE Sensex was trading 0.12% or 45 points higher at 36,369 levels.

Hindustan Unilever (HUL) is the country’s most valued FMCG Company with a market cap of Rs 3.67 trillion, while ITC have market cap of Rs 3.32 trillion, data shows.

Thus far in the calendar year 2018, Nestle India has outperformed the market by surging 33%, as compared to 7% rise in the Sensex. The stock rallied 50% from its February 9, 2018 low of Rs 6,959 against 7% rise in the benchmark index.

Nestle India had reported a better than expected 38% year on year (YoY) growth in net profit at Rs 4.24 billion in March 2018 quarter (Q1CY18). The company expects timely monsoon will bring demand stability and spur growth this year, while the fast-growing e-commerce channel will provide good opportunities in the future.

Nestlé India is a market leader in instant noodles and baby food products and No.2 player in the instant coffee and chocolates segment.

Analyst at JP Morgan remain optimistic about Nestlé’s long-term growth potential, given low penetration levels and the dominance of unorganized players in the Indian processed foods industry, and welcome management’s renewed focus on volume/innovation.

“We expect the revenue/earnings growth trajectory to improve over CY18, supported by healthy volume growth and margin expansion,” the brokerage firm said in result update with ‘Overweight’ rating on the stock with target price of Rs 10,500.

ICICI Securities also remains positive on the company’s future prospects given its thrust on creating a balanced portfolio through new launches and planned entry in new categories, aggressive communication strategies, expanding the reach and lower indirect taxes for many items under GST regime. Rapid urbanization and increasing participation of women in decision making is a huge opportunity for the company given the nature of its product portfolio.

“We remain positive on growth prospects as the company is aggressively launching new products and variants in the existing brands which would perk up the growth, going forward. We expect earnings growth at a CAGR of 25% in CY17-19E led by strong sales growth,” the brokerage firm said in recent note with target price of Rs 11,450.