HDFC Securities has upgraded Nestle to 'Buy' with target price of Rs 7,750 in its report.

Nestle's 4QCY14 revenues grew by 11.8% YoY to Rs 25.3 billion as the domestic business continued its upward trajectory with a 11.3% YoY growth. Back of the envelope calculations suggest a 3-3.5% YoY volume growth in the domestic business. In addition, exports witnessed a recovery with 17.9% YoY growth. EBITDA margin expanded 99bps YoY to 22.1% aided by lower COGS (down 203bps). APAT grew by 17% YoY to Rs 3.2 billion.

Commenting on the investment rationale, the stock broker said, ''Discretionary categories esp. packaged foods are yet to witness any material uptick. However, Nestle's category and brand mix offer tremendous growth opportunities over the longer term. Its product portfolio's urban tilt and gradual decline in food inflation will benefit the company immensely due to imminent urban revival. Furthermore, softening in key RMs (esp. wheat, sugar and vegetable oil) can provide a significant margin boost. Upgrade to Buy with a TP of Rs 7,750.''

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