Update on the Indian Equity Market:
\nOn Wednesday, NIFTY ended up 77 pts (+0.7%) at 11,550.
\nAmong the sectoral indices, MEDIA (+2.5%), AUTO (+1.5%) and PVT BANK (+1.8%) were the top gainers while FMCG (-0.2%) and PHARMA (-0.1%) were the losers.
\nAmong the stocks, TATAMOTORS (+8.8%), HEROMOTOCO (+6.4%), and INDUSINDBK (+6.0%) were the top gainers. BHARTIARTL (-2.9%), ULTRACEMCO (-2.2%), and ASIANPAINT (-1.4%) were the top losers.<\/p>\n
Pandemic has impacted all layers of FMCG – Nestl\u00e9<\/p>\n
Edited excerpts of an interview with Mr. Suresh Narayanan, MD & CEO of Nestle with Mint dated 25th August 2020:<\/p>\n
\u2022 Food companies with a strong digital-first capability are the ones that are going to hold consumers\u2019 interest for a long time, Nestl\u00e9 boss Suresh Narayanan said.
\n\u2022 His comments on consumer sentiment and mobility:
\no Covid-19 is not just a health challenge, it is also a humanitarian call to redefine the way humans live, engage and work innovatively.
\no Companies that are better placed to react to the new normal will naturally be preferred more by consumers.
\no Food companies need to leverage their in-depth knowledge of food habits, nutrition, quality and safety in order to innovate and renovate, and adapt to this new normal.
\no They need to respond to new demands, reset defining relationships with consumers and reconsider their product portfolio in the post-covid era to make products healthier, while allowing consumers to make an indulgent choice.
\n\u2022 His outlook for the Indian economy in the short and medium term: India\u2019s economy is showing signs of recovery after withstanding the impact of covid-19. Some sectors were impacted more than others. With easing of restrictions on economic activities, businesses are slowly getting back on track. The government announced several measures to ensure business continuity and sectoral revival.
\n\u2022 When asked what other measures government should take to drive demand, he replied that the government has taken measures to increase liquidity and is hopeful that it will help the economic climate and push up demand. MGNREGA inputs have maintained an income source for a large number of people in rural areas and helped maintain demand. A good monsoon also helps. While we do see a push up in rural demand, as the economy starts opening up, it should create jobs and help build up urban demand as well. A strong focus on infrastructure development will revive the job sector as well as demand.
\n\u2022 Nestl\u00e9 has witnessed better growth in Tier 2, 3 and 4 cities, semi-urban areas than urban areas during the lockdown. Rural consumption continues to be stronger than urban demand.
\n\u2022 Strong performance was delivered in the e-commerce channel. The demand in all out-of-home consumption channels experienced a sharp decline due to the lockdown. However, Nestl\u00e9 brands enjoy trust, credibility and strength as far as in-home consumption is concerned. This boosted sales of dairy whitener, milk and coffee, all of which performed well. Maggi witnessed solid growth towards the end of the quarter after initial supply constraints.
\n\u2022 When asked whether consumer preferences will change when things will go normal, he stated that Covid-19 has had a profound impact on the pace, channel, texture and frequency of consumption, across a variety of segments in FMCG. There is a redefinition of out-of-home consumption in favor of brands and formats that are more in-home.
\n\u2022 Channel contexts have undergone sharp changes with a surge in e-commerce. Nestl\u00e9 witnessed contribution of e-commerce going up significantly, while out-of home has not done well. If you look at e-commerce channels in the US, what took eight years in terms of penetration was achieved in eight weeks. Clearly the e-commerce journey is here to stay and there will be recalibration of channels.
\n\u2022 Quality, safety, nutrition and trust have undergone sharper re-definition and consumers tend to favor tried-and-tested brands and relationships formed herein. A new word has been added to the lexicon of consumer needs, which is \u201cimmunity” for self and the family. Categories that are in favor have changed and, together with the economic pandemic that followed Covid-19, a recalibration of the consumer wallets is taking place where essentials are taking precedence over luxuries, however affordable they are.
\n\u2022 When asked how Nestle has prepared to adapt to this change, he commented that their entire innovation funnel is undergoing a change. Every business is recalibrating in the context of newly relevant consumer behaviors that are coming in, that is, what innovations we should go with, what innovation should be left out.
\n\u2022 He is a great believer that in a crisis, one should engage, not disengage. If we disengage, then the consumer has other choices. Going forward, consumers are going to be more digitally active than they were earlier, and food companies with a strong digital-first capability are the ones that are going to hold consumers\u2019 interest for a long time. Overall, Nestl\u00e9 have accelerated digital engagements across key parts of our portfolio and put out innovative digital campaigns to engage with consumers.<\/p>\n
Consensus Estimate: (Source: market screener, investing.com websites)<\/p>\n
\u2022 The closing price of Nestle India was \u20b9 16,202\/- as of 26-Aug-2020. It traded at 71x\/51x\/62x the consensus EPS estimate of \u20b9 228\/269\/311 per share for FY21E\/ FY22E\/ FY23E respectively.
\n\u2022 The consensus target price of \u20b9 16,758\/- implies a PE multiple of 54x on FY23E EPS of \u20b9 311\/-<\/p>\n
Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”<\/p>\n","protected":false},"excerpt":{"rendered":"
Update on the Indian Equity Market: On Wednesday, NIFTY ended up 77 pts (+0.7%) at 11,550. Among the sectoral indices, MEDIA (+2.5%), AUTO (+1.5%) and PVT BANK (+1.8%) were the top gainers while FMCG (-0.2%) and PHARMA (-0.1%) were the losers. Among the stocks, TATAMOTORS (+8.8%), HEROMOTOCO (+6.4%), and INDUSINDBK (+6.0%) were the top gainers. […]<\/p>\n","protected":false},"author":5,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[414],"tags":[370,519,521,520],"_links":{"self":[{"href":"https:\/\/www.assetmultiplier.co.in\/blog\/wp-json\/wp\/v2\/posts\/1316"}],"collection":[{"href":"https:\/\/www.assetmultiplier.co.in\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.assetmultiplier.co.in\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.assetmultiplier.co.in\/blog\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/www.assetmultiplier.co.in\/blog\/wp-json\/wp\/v2\/comments?post=1316"}],"version-history":[{"count":1,"href":"https:\/\/www.assetmultiplier.co.in\/blog\/wp-json\/wp\/v2\/posts\/1316\/revisions"}],"predecessor-version":[{"id":1317,"href":"https:\/\/www.assetmultiplier.co.in\/blog\/wp-json\/wp\/v2\/posts\/1316\/revisions\/1317"}],"wp:attachment":[{"href":"https:\/\/www.assetmultiplier.co.in\/blog\/wp-json\/wp\/v2\/media?parent=1316"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.assetmultiplier.co.in\/blog\/wp-json\/wp\/v2\/categories?post=1316"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.assetmultiplier.co.in\/blog\/wp-json\/wp\/v2\/tags?post=1316"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}