Brokers' call: Citi upgrades Nestle to ‘Buy’

Citigroup has upgraded the rating of Nestle to ‘Buy’ and set a target price of Rs 5,625. Citi view Nestle as among the best plays on India consumption growth over the long term. Concerns on relatively lower volume growth are likely to dissipate over the next few Qs as enhanced capacities enable volume growth to resurrect and surprise on the low expectations.

A conscious strategy to improve mix especially in chocolates/ confectionery and milk products/nutrition should drive gross margin improvement going forward, besides cost inflation in key inputs like milk also appears to be leveling off. With a distribution ramp-up happening at a rapid pace will help to push products into rural/semi urban areas.