Nestle India, Trent, GSK Consumer hit fresh highs in weak market

Shares of Nestle India, GlaxoSmithKline (GSK) Consumer Healthcare, and Trent hit their respective new highs on the BSE in intra-day trade on Wednesday in an otherwise weak market. In comparison, the S&P BSE Sensex was down 0.46 per cent at 37,157 points at 12:08 pm.

Nestle India gained 4 per cent to Rs 12,397, and surpassed its previous high of Rs 12,266, recorded on August 9. Since August 5, the stock has outpaced the market by gaining 8 per cent after the fast moving consumer goods (FMCG) company delivered strong volume and mix-led growth in the April-June quarter and announced that its ninth factory in India would come up in Gujarat. In comparison, the S&P BSE Sensex has remained flat during the same period.

The company had also declared a dividend of Rs 203 per share, including a special dividend of Rs 180 per share out of the accumulated profits of previous years. The management said this cash payout will reduce the future generation of 'other income' and will improve the overall capital efficiency.

Analysts at JP Morgan are ‘overweight’ on Nestle India with June 20 target price of Rs 12,800 per share. The brokerage firm remains optimistic about Nestlé’s long-term growth potential, given low penetration levels and the dominance of unorganized players in the Indian processed foods industry. The brokerage firm has also welcomed the management’s renewed focus on volume/innovation.

Trent climbed 3 per cent to Rs 489, also its new high on the BSE. The stock has risen 12 per cent in the past two weeks, as compared to 1.5 per cent rise in the benchmark index during the same period. On August 6, the Tata Group Company had allotted 23.17 million equity shares at a price of Rs 410 per equity share amounting to Rs 950 crore on a preferential basis to Tata Sons, the Company's promoter. Post the transaction, Tata Sons' holding in Trent increased to 32.45 per cent from the earlier 27.74 per cent.

The stock has rallied 25 per cent since June 18, when the company announced the preferential issue to Tata Sons in the context of the Company's funding requirements given the growth plans. The company said it is witnessing positive traction for its lifestyle retail concepts and consequently pursuing a substantially accelerated growth programme across the Westside, Zudio and Star formats.

GSK Consumer Healthcare hit a new high of Rs 8,000, up 8 per cent thus far in August, on good operating performance in the June quarter.

“Going ahead, management expects the impact of the hardening raw material cost trends to be more visible as both dairy and barley prices have seen a steep rise. Management indicated that it will take price hike in January to offset the inflationary pressure in raw materials. Both Horlicks and Boost brands have a good strategic fit with Hindustan Unilever’s portfolio and could gain significantly post integration later during the year,” analysts at Nirmal Bang Securities said in result update.

“There are emerging concerns over margins with the sharp increase in commodity prices, thus, keeping underlying operating margin expansion under check. Given the nature of the Hindustan Unilever –GSK Consumer Healthcare transaction, the company’s stock price should track HUVR’s stock performance and not its own financial performance, unless an unlikely scenario of the deal getting called off arises,” Motilal Oswal Securities said in result update.