Nestle India Q1 Results Review - Weak Revenue Growth; Miss On All Fronts: Motilal Oswal

Motilal Oswal Report

Nestle India Ltd. reported weak 3.3% YoY revenue growth (estimate: 8.6%) in Q1 FY25. Last eight-quarter average revenue growth was 14%. Domestic sales grew 4.2% YoY, supported by volume growth and a favorable product mix. Export sales contracted by 7.2% YoY to Rs 1.8 billion.

Gross margin expanded 280 basis points YoY to Rs 57.6% (estimate: 55.5%). Gross profit was up by 9% YoY. Input prices are seeing inflation, with coffee and cocoa prices hitting all time highs. Cereals and grains (MSP led) are also seeing inflationary trends. Prices are stable for milk, edible oils and packaging. Nestle has seen a strong gross margin recovery (up 300 bp) in the last 12 months; we model a limited expansion in FY25. With 11% growth in operating costs, Ebitda margin inched up 40 bp. Ebitda grew 5% YoY to Rs 11.2 billion (estimate: Rs 12.1 billion).

Nestle has been focusing on its RURBAN strategy and expanding its distribution reach in the untapped markets. E-commerce continued to deliver healthy growth, with double-digit growth in Q1.

During the quarter, Nestle added 800 distribution touchpoints and increased its village coverage by 5,000 to ~205,000 villages. Nestle posted broad-based growth across brands for the last few years.

We reiterate our Neutral rating with a target price of Rs 2,500 (based on 60 times P/E Jun’26E) due to expensive valuations.

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