Nestle India Ltd. is in focus on Friday after financial services group Nomura reiterated its ‘buy’ call on the FMCG stock. Nomura gave a price target of Rs 22,900, implying an upside of more than 20 percent from Thursday’s closing level.

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The price target values Nestle India at 68x calendar year 2024 price-to-earnings.

According to Nomura, Nestle India is going to benefit from multiple steps that the company has undertaken in order to spur growth.

The Nomura note highlights four steps Nestle is taking for the same. They are:

1. Stepping up volume growth

2. Deepening distribution reach under RURBAN (a combination of rural and semi-urban areas)

3. Introducing value-added products by leveraging Nestle SA’s R&D (research and development) capabilities and

4. Nudging consumers towards premiumisation.”

One of the key trigger for the stock price could be the Rs 5,000 crore capex investments over the next 2-3 years, noted Nomura. It can lead to sales CAGR (compounded annual growth rate) of 10-15 percent over the next 4-6 years, it added.

The brokerage also believes that another positive trigger for Nestle India can be the Purina Petcare business, which is in the scale-up stage, and can significantly contribute to growth figures going ahead.

To recall, Nestle had approved the acquisition of the pet foods business of Purina Petcare India for Rs 123.5 crore in October 2022, giving the company access to the fast-growing pet foods business.

On the flip side, Nomura also highlighted that a key risk for Nestle India in the short term would be the royalty at 4.5 percent of revenue, which is up for renewal in 2024. Royalty is essentially the payment by Indian companies to their international parents (in this case, Nestle SA).

Shares of Nestle India are trading little changed at Rs 19,022.80.

(Edited by : Rukmani Krishna)