Nestle India stock hits lifetime high; Here are 3 factors driving the bulls

Shares of Nestle India surged as much as 4% in trade on Thursday and scaled a lifetime high, buoyed by the high dividend payout, stock split, and robust earnings for the September quarter.

The Maggi noodles maker announced an interim dividend of Rs 140 a share, and the board also approved a 10-for-1 stock split.

This saw the stock rising to a lifetime high of Rs 24,168.15 on the National Stock Exchange. Gains in the stock on Thursday were backed by strong volumes of 2,25,600 shares, way above the six-month daily average volume of 65,749 shares.

So far in 2023, the stock has given close to 23% returns, beating sector bellwether Hindustan Unilever, which has given negative returns in the same period.

Besides a dividend and stock split, the company also reported healthy earnings, with net profit surging more than 37% on year to Rs 908 crore in the September quarter, largely on the back of a one-time gain of Rs 106 crore.

This one-time gain was with respect to write-back of provisions made in earlier periods for an indirect tax matter, the company said.

Revenue from operations increased 9.5% on year to Rs 5,037 crore, aided by price hikes and volume growth. Domestic sales rose to Rs 4,824 crore from Rs 4,372 crore a year ago. Gross margins expanded by 381 basis points on year and 167 bps sequentially to 56.5%, due to higher net realizations.

As a result, operating margins expanded by 245 bps on year and 167 bps sequentially to 24.4%.

“Nestle reported a strong set of numbers in the current context (low-single digit growth numbers expectations from the sector)…Nestle remains a preferred pick given strong volume growth visibility as it is under-indexed in small towns and rural India,” said Amnish Aggarwal – head of research, Prabhudas Lilladher.

However, the brokerage expects firm commodity prices in the coming quarters to restrain any meaningful margin expansion from the high levels of the September quarter.

The brokerage has an “accumulate” rating on the stock.

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