te Bull vs Bear: Should you invest in Nestlé stock? Zee Business analysis reveals this! | Zee Business

Bull vs Bear: Should you invest in Nestlé stock? Zee Business analysis reveals this!

Should you invest in Nestlé shares? Zee Business does a deep dive into what is working for the Fast-Moving Consumer Goods (FMCG) sector. 

Bull vs Bear: Should you invest in Nestlé stock? Zee Business analysis reveals this!
Also, Morgan Stanley Financial Advisors has been bearish on the company and has given a target of Rs 15712.

Should you invest in Nestlé shares? Zee Business does a deep dive into what is working for the Fast-Moving Consumer Goods (FMCG) sector. A report by Zee Business research analysts Varun Dubey and Ashish Chaturvedi! 

While Senior Research Analyst Dubey maintained a bullish view on this stock, Chaturvedi picked a contrary view. Here is what they say!

Dubey said that the margins of this company were more than the estimates for the overall FMCG sector. In fact, the gross margins of the company has improved as well. The financial performance has been good so far, even during the bad time of the FMCG sector, he added.

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Countering this, Chaturvedi pointed out poor earnings before interest, taxes, depreciation, and amortization margins (EBITDA) margins of the company. Besides, the company's export business has been performing badly as well, he added. 

Dubey countered, saying the company has perfect brand positioning in the instant noodles sector. Nestlé Maggi is the best example of products having inelastic demand, just like cigarettes, he opined.

While the pet care subsidiary of Nestlé is widely popular in the international market, it is not available in the Indian market. This segment gives a margin of approximately 21 per cent, and the company is missing this opportunity in the Indian pet care market, Chaturvedi argued.

Dubey said that to cover all its segments, Nestlé is all set to expand its CapEx, which will bear benefits for it.

The valuations are very bad; the price-to-earnings ratio (PE) multiple stands at 75, the medium PE from the years 2006 to now has been around 46. While the PE of the company in 2005 was on 30, Chaturvedi said.

Nomura Financial Advisory and Securities Private Limited have suggested a target of Rs 21150, which is at a PE of 100. Nomura has a knack for this stock even at a PE of 100, Dubey opined.

Chaturvedi countered by comparing the returns of Nestlé with its parent company. Where Nestlé only gave a return of 4 per cent, its parent company reported a return of 21 per cent.

Also, Morgan Stanley Financial Advisors has been bearish on the company and has given a target of Rs 15712.

Market Expert Sumeet Bagadia supported the bull run on the company and gave a target of Rs 20,000. He suggested investors buy at dips as the stock has bottom level support of Rs 16200 - Rs 16800. As the FMCG sector moves towards recovery, this stock will also move upwards. Besides, he recommended equity investors hold their position in this stock.

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Written By: ZeeBiz WebTeam
Edited By: Shivendra Kumar
Updated: Wed, Mar 23, 2022
04:13 pm
ZeeBiz WebDesk
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