Nestle India Q4 Results Review - Steady Performance; But Valuations Expensive: Motilal Oswal

Motilal Oswal Report

Nestle India Ltd. reported 8% YoY revenue growth (estimate: 11%) in Q4 CY24. The company has sustained a 10% four-year revenue compound annual growth rate. Domestic sales grew 9% YoY, well supported by pricing, mix, and volume growth. Export sales dropped 5.6% YoY to Rs 1.6 billion during the quarter.

Gross margin continued to expand 370 basis points YoY/210 bp QoQ to Rs 58.6% (est: 56.8%). The costs of maize, sugar, oilseeds, and spices were hit by uneven rainfall. Conversely, prices of milk, wheat, and rice remained stable. We model 57% gross margin for FY25/FY26; it rebounded after touching 54% in CY22 (CY21: 57%).

Ebitda grew 13.5% YoY to Rs 11.3 billion (est: Rs 11.4 billion). Nestle’s portfolio is relatively safe form local competition; thus, operating costs have not accelerated unlike its fmcg peers. We believe the company will be able to sustain its Ebitda margin at ~25% for FY25/FY26.

Nestle has been building its blocks around its RURBAN strategy and driving its distribution reach in the untapped markets. There has been a broadbased growth across brands for the last few years. Reiterate Neutral with a target price of Rs 2,400 (based on 60 times price/earning Dec-25E) due to expensive valuations.

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