Nestle India may split its stock for the first time
What's the story
Nestle India has announced that its board of directors will consider a stock split of its existing equity shares on October 19, alongside the release of its September quarter results. This would mark the first-ever stock split for the fast-moving consumer goods (FMCG) giant, which has never before declared a stock split or bonus issue. The proposed change in share capital would involve dividing or splitting the existing equity shares, each with a face value of Rs. 10.
Details
Stock performance and analyst expectations
Following the stock split proposal, Nestle India's stock rose over 2% intraday and ranked among the top Nifty gainers. At the time of writing, it was trading at Rs. 22,784 apiece on NSE. Analysts predict that Nestle India's September quarter results will surpass the FMCG sector, driven by steady volume growth and robust pricing growth. Kotak Institutional Equities forecasts an 11% YoY increase in domestic revenues and a 15% YoY increase in export revenues.
What Next?
Valuation and long-term growth prospects
Foreign brokerage firm UBS points out that Nestle India's current valuation is high, which may limit potential stock price growth. The stock is trading at 66x 1-year forward earnings, one standard deviation above the mean multiple. Nevertheless, UBS remains positive about the company's long-term revenue and volume growth, attributing strong brand equity, pricing and premiumization levers, and a focus on product innovation as key growth drivers in rural markets.
Insights
Second interim dividend for 2023
In addition to reviewing the stock split proposal, Nestle India's board will also announce a second interim dividend for 2023 on October 19, if applicable. If declared, the second interim dividend will be paid starting November 16, 2023. The board meeting will also consider the company's financial results for the third quarter and the nine months ending September 30.
Facts
Financial performance and product portfolio
In 2022, Nestle India reported total sales of Rs. 16,790 crore and a net profit of Rs. 2,390 crore. The company declared a total dividend of Rs. 220 per equity share for that year. Nestle India's product line-up includes noodles, coffee, chocolates, packaged milk, and baby food, among other items.