1:10 Split Done, Now FMCG Stock To Pay 700% Dividends In March; 5 Brokerages Recommend BUY, Rs 2,900 TP

FMCG giant, Nestle India is soon going to reward investors with a whopping 700% third interim dividend in March. The stock has already turned ex-dividend for the same. This will be the first dividend after its stock split of 1:10 ratio last year. Nestle is an attractive bet in the FMCG sector with five brokerages recommending buying. The highest target price in Nestle is Rs 2,900 per share.

Nestle Share Price:

On BSE, Nestle shares stood at Rs 2,453.70 apiece, down by 1.34% with a market cap of Rs 2,36,575.24 crore after market hours of Thursday.

Nestle Dividend:

Nestle announced a third interim dividend of Rs 7 per share of the face value of Re. 1/- each for the Financial Year 2023-24 on the entire issued, subscribed and paid-up share capital of the Company of 964,157,160 equity shares of nominal value of Re. 1 each.

The third Interim Dividend for the Financial Year 2023-24 will be paid on and from 5th March 2024 to those members whose names appear in the Register of Members of the Company and as beneficial owners in the
Depositories, as on the Record Date fixed for the purpose i.e., 15th February 2024.

Hence, only those investors will be eligible who hold shares of Nestle by the end of February 15.

Nestle Stock Split:

On February 7, 2024, the company also highlighted that on and from the Record Date of 5th January 2024, the equity shares of the Company were sub- divided, such that 1 (one) equity share having a face value of Rs. 10/- (Rupees ten only) each, fully paid-up, stands sub-divided into 10 (ten) equity shares having a face value of Re. 1/- (Rupee one only) each, fully paid-up, ranking pari-passu in all respects.

Nestle Results:

In Q3FY24, Nestle's total sales stood at Rs 4583.6 crore. Total Sales Growth stood at 8.3%, while Domestic Sales Growth was at 8.9%. Profit from Operations was at 21.9% of Sales. Meanwhile, the company earned a net profit of Rs 655.6 crore.

Nestle Share Target Prices:

Elara Capital:

We believe increased rural distribution and a rise in penetration will ensure robust sales growth. We raise our estimates by 2.5% for CY24 and 1.5% for CY25 to factor in higher-than-expected margin. We reiterate Accumulate with a higher TP of INR 2,720 from INR 2,600 based on 65x (unchanged) CY26E P/E as we roll forward.

Prabhudas Lilladher:

We tweak CY24/25 EPS estimates by -0.3%/-1.6% as we factor in higher margins but a slightly slower growth rate in the Prepared dishes segment following rising competition from regional and smaller players in the Instant Noodles segment. 4Q23 sales missed estimates as expected pick-up did not materialize in the festival season (despite Diwali being in 4QCY23). NEST continues to report broad-based growth across segments, markets (Metros, T1-6 cities & rural markets) and channels (MT, OOH and E-commerce). Expansion plans are on track with Rs13.7bn capex in CY23 and land allotment for the 10th unit in Odisha.

We believe most of the gains from soft RM have been derived and incremental margin expansion will come at a tepid pace as a shortfall in production is likely to keep prices of edible oils, Coffee, sugar, spices and wheat firm in the near to medium term. We factor in EBITDA margin expansion of 50bps over CY23-25 and estimate a 10.6% PAT CAGR. We remain constructive in the long term, however, expect back-ended returns given rich valuations of 64.8x CY25 EPS. Maintain 'Accumulate'.

Long-term drivers remain intact, led by 1) sustained expansion in rural reach (~20-25% of sales) 2) healthy innovation pipeline (Maggi Professional's plant-based range in 4Q23, Masala Millet, KitKat premium portfolio in 3Q23), 3) huge scope of growth in coffee, RTD & Chocolates and 4) higher growth in channels like E-Com and MT and 5) strong traction in Pet care segment

BOBCAPS:

NEST continues to deliver a strong performance in domestic markets amid a challenging environment, supported by consumer engagement, new launches and an increasing reach in rural markets. We expect sustained, profitable growth underpinned by continued investments in innovation, premiumisation and direct reach expansion with a rural focus. The stock is trading at 66.6x/55.6x on FY25E/FY26E EPS. We introduce FY26 estimates and roll valuations over from CY25E to FY26E. Our TP remains at Rs 2,826 based on an unchanged 65x P/E multiple - in line with the long-term average

Dolat Capital:

Nestlé's Q4CY23 revenues and EBITDA were in line with our estimate. Hence we have maintained our CY24/25E EPS estimates at Rs 36.8/41.7 respectively. As the company has a leadership position and unique positioning in most of the categories, we believe that its growth rate would remain high. Further, Nestlé's margins would remain high with a softening in most of the commodity prices and strong brand power which allows it to maintain price hikes. We continue to value the stock at 65x CY25E EPS and maintain TP of Rs 2,700. Considering rich valuations we maintain Accumulate. BUY on dips.

Citi:

The brokerage also maintained a buy for a target price of Rs 2,900 per share with a positive outlook. This is the highest target price on Nestle.

The recommendations made above are by market analysts and are not advised by either the author nor 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.