Nestlé India shares decline as BofA Securities downgrades rating to 'Underperform'. Target price remains at ₹2,140 due to high valuation and limited growth outlook.
Maggi Share: FMCG giant Nestlé India's shares witnessed significant pressure on Wednesday (April 2nd). During intraday trading, the share price fell by approximately 3.67%, reaching ₹2,150, nearing its 52-week low of ₹2,115. This decline was primarily attributed to a report from global brokerage firm BofA Securities, which downgraded the company's rating from 'Neutral' to 'Underperform'. However, the target price remained unchanged at ₹2,140.
Reasons for the rating downgrade?
According to BofA Securities, Nestlé India's current valuation is considered significantly high, and its growth outlook appears weak. The company's Price-to-Earnings (P/E) ratio stands at 63.07, exceeding that of its competitors. Consequently, analysts have reduced their earnings forecasts for the company by 3-5%.
Furthermore, analysts believe that recent trends related to costs and taxes will continue to pressure profitability. While a slight volume recovery is possible due to a weak base, overall growth prospects appear limited.
Company needs a strategic shift
Experts suggest that Nestlé India needs to make significant changes to its product portfolio over the next 3-5 years. Considering evolving consumer trends, the company needs to focus on new products to maintain its market competitiveness.
Share performance and market conditions
At 12:30 PM on Wednesday, Nestlé India shares were trading at ₹2,202.90, slightly above the day's low but still reflecting a 1.31% decline. Conversely, the BSE Sensex was up 0.57%, reaching 76,456.15.
Nestlé India shares have fallen by approximately 18.62% over the past six months and 16% over the past year. The company's 52-week high was ₹2,777, and its low was ₹2,115. Despite this decline, the company's total market capitalization on the BSE remains at ₹2,12,394 crore.
