Blue Chip Nestle Hits New 1-Year High As 1:10 Share Split Record Date Nears; What's Special about This FMCG?

Maggi maker Nestle shares have been in a strong rally right after the FMCG giant announced the record date for its 1:10 stock split. The blue-chip stock has hit back-to-back new 52-week highs as the record date nears. On Wednesday, Nestle shares zoomed by at least 1.10% to hit a new 1-year high of Rs 25,765.90 apiece. The stock split is a much-awaited corporate action for those who are looking to buy Nestle shares at a cheaper rate because the company is currently the seventh most expensive stock in the Indian market.

In two trading sessions, Nestle's share price has zoomed by a whopping Rs 1,411.65 or 5.8%. On December 19th, the stock alone had rallied by at least 5%.

From its 52-week low of Rs 17,888, the stock has advanced by more than 44%.

Nestle's Stock Split:

On December 18, Nestle said that the company had fixed January 5 as the record date for determining the entitlement of equity shareholders for sub-division/ split of existing equity shares.

A 1:10 stock split ratio at Nestle means that every existing equity share having a face value of Rs 10 each will be sub-divided into ten equity share shares having a face value of Re 1 each fully paid-up.

The company's equity shares paid-up value is Rs 964,157,160 at a face value of Rs 10 per share.

This will also be Nestle's first stock split.

What's special about blue-chip like Nestle?

Nestle is also a special stock with the highest return on equity (ROE) and return on capital employed (ROCE) compared to its peers like Britannia Industries, Hindustan Unilever, Godrej Consumer and Varun Beverages.

As per ICICI Direct data, Nestle's ROCE and ROE are currently the highest among its peers, at a staggering 59.47% and 108.52 respectively. While FMCG biggiesl like HUL have an ROCE and ROE of 24.88% and 20.42%, while Britannia with ROCE of 48.18% and ROE of 66.62%.

Further, there are more positives than negatives in Nestle, as per Trendlyne data. These positives are:

- Debt to Equity Ratio of 0.01 is less than 1 and healthy, implying that its assets are financed mainly through equity.

- Mutual Fund Holding increased by 0.09% in the last quarter to 4.96.

- Interest Coverage Ratio is 24.67, higher than 1.5, indicating that it can meet its interest payments comfortably with its earnings (EBIT).

- Nestle stock outperformed its sector by 15.04% in the past year.

- Promoter Pledges are zero.

- Return on Equity(ROE) for the last financial year was 97%, more than 20% in the last financial year, indicating an efficient use of shareholder's capital to generate profit.

- Promoter Share Holding stayed the same in the most recent quarter at 62.76%. This is a neutral factor.

The only negative in Nestle as per Trendlyne data is its Price to Earning Ratio which is 82.44, higher than its sector PE ratio of 73.66. Nevertheless, the consensus recommendation from 35 analysts for Nestle India is HOLD. Nestle's EPS is expected to grow by 24.3% in FY23.

It needs to be noted that Nestle follows a calendar year for its financial reporting. Nestle's earnings have been healthy so far.

In Q3 of 2023, the company's sales of products stood at Rs 5,009.52 crore, compared to Rs 4,577.44 crore in Q3 of 2022. Revenue from operations was at Rs 5,036.82 crore in Q3 of 2023, as against Rs 4,658.53 crore in Q2 of 2023 and Rs 4,610.84 crore in Q3 of 2022. Net profit also surged to Rs 908.1 crore in the quarter under review, as against Rs 661.46 crore in Q3 of 2022

Currently, Nestle is trading above 8 out of 8 SMAs and is trading above 6 out of 9 Oscillators in a bullish zone. Nestle is also trading above its Pivot 25235.2.

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author or Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.