Despite prevailing macroeconomic conditions, NESTLE grew revenue by 43.4% YoY in Q1'24. However, earnings were eroded by higher production costs and foreign exchange losses. In FY'24, we expect sustained topline growth following price increases across product categories, the launch of innovative and affordable products, and improved distribution reach, which should potentially drive volumes. In addition, the company aims to lower the costs of production through energy efficiency and by replacing imported inputs with local content. While we expect foreign exchange losses to drag FY'24 earnings, we anticipate a potential return to profitability from FY'25 on the back of stability in the FX market. Overall, we update our 12-month TP to N1084.40 (vs N1275.64 previously) and raise our recommendation to a BUY from a HOLD.
