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Motilal Oswal Report
Nestle India Ltd.'s shares may remain in focus after Motilal Oswal reiterated its ‘Neutral' rating on the stock, citing expensive valuations despite a strong recovery in growth and improving cash flows.
The brokerage has set a target price of Rs 1,400, implying limited upside from current levels.
Valuation and view
- There is no material change to the brokerage's FY27 and FY28 EPS forecasts.
- GST 2.0 stimulates consumption, drives affordability, and contributes to the overall growth of the FMCG sector. About 85% of the company's portfolio has benefited from the GST 2.0, leading to strong volumes across LUPs and larger packs. Apart from macro tailwinds, Nestle's own initiatives, such as its investments in brands, strengthening distribution, and increasing capacity, are cumulatively boosting strong performance delivery.
- Packaged food companies (15-20% crude linkage) are relatively less exposed crude compared to HPC players (25-30%)
- Motilal Oswal models a CAGR of 12%/15%/18% in revenue/Ebitda/APAT over FY26-28E.
The stock is trading at 68x/60x FY27E/FY28E EPS. Given its expensive valuation, the brokerage reiterates its Neutral rating on the stock with a revised target price of Rs 1,400 (based on 60x P/E Mar'28E).
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