Motilal Oswal Securities has maintained 'Neutral' on Nestle India with target price of Rs 5,065 as against current market price (CMP) of Rs 5,008 in its report.
Commenting on the investmen rationale, the stock broker said, ''Domestic volume growth in CY13 was 0.8% on a base of 0.8% in CY12, reflecting the twin impact of underlying slowdown in discretionary consumption and Nestle's portfolio optimization strategy (impacted volumes by 1.4%).
Volume growth was weak in milk products (-3.6%) and chocolates (-2.3%), while relatively better in prepared dishes (3.9%) and beverages (3.2%).
Nestle's strategy of driving resources behind high margin portfolio is long term positive but impacts volumes in the near term. Despite a weak base, we do not expect its volume growth to show material improvement (channel checks suggest continued weakness).
RM inflation is a key risk to earnings. Rich valuations (35.8x CY14E and 30.5x CY15E EPS) do not provide any margin of safety. Maintain Neutral. Reversal of urban sentiments is a key upside risk to our rating.''
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