Nestle India Q1 Results Review - Revenue Growth A Laggard: Dolat Capital

Dolat Capital Report

Nestle India Ltd.’s Q1 FY25 results were below our estimates. The domestic revenue grew by 4.2% YoY, while exports de-grew by 7.2% YoY. Revenue increased by 12.1% on a four-year CAGR basis.

Despite inflationary pressure, gross margin expanded 280 bps YoY to 57.6%. Coffee, cocoa, cereals and grains saw high inflation, while milk, packaging and edible oils prices remained fairly stable.

We believe raw material prices would pressurize gross margin, in the near term.

We reduce our FY25/26E EPS estimates to Rs 36.5/41.4. Although we believe Nestle’s growth rate and profitability will remain high in the long run (given strong leadership and unique positioning in most categories), the company may also witness near-term demand and inflationary headwinds.

That being said, we downgrade our rating to ‘Reduce’ from Accumulate and arrive at target price Rs 2,691 (Rs 2,773 earlier) valuing the stock at 65 times FY26E EPS.

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