Reduce Nestle India - Kotak

We believe Nestle India's segments of relative strength are likely to be challenged in the coming years, with visible competition from ITC in the instant noodles segment. In addition, Nestle's innovations over the past 2-3 years have been modest in scope and have progressed at a (perhaps deliberately) slow pace, leading to a lack of visibility in medium-term revenue growth. Near-term, we think the company's pricing levers may be nearing exhaustion, leaving little scope for further margin expansion. We forecast 13% earnings growth CAGR through CY14-CY16E. Valuations, given growth outlook, are stretched, and leave no margin for safety, in our opinion. Initiate with REDUCE (PT: Rs 4656).

Source : Equity Bulls

Keywords