Innovation, new launches are strong brew for Nestle, say Edelweiss analysts

Though management indicated input cost pressure, price hikes and cost efficiency should help protect margins

Post the correction across fast-moving consumer goods (FMCG) space in the past one month, valuation (price-to-earnings ratio) of Nestle India (Nestle) too is down sharply to 41-42 times estimated earnings for the calendar year ending 2020 (CY20) from over 50 times earlier. Though the stock still looks pricey, analysts foresee a 15-25 per cent upside over a year amid healthy earnings potential. As seen in September 2018 quarter (Q3’CY18) results announced on Friday last week, innovation, new product launches and market share gains are likely to continue fuelling Nestle’s earnings in coming quarters.

Led by broad-based volume growth, Nestle’s net