Nestle India's quarterly show disappoints on food inflation, heatwave impact; brokerages remain neutral

Nestle has seen a strong gross margin recovery (up 300 bps) in the last 12 months.

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26 Aug, 2025 12:21

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Nestle India's quarterly show left brokerages hungry for more, as the Maggi-makers profit and revenue came in below estimates.

Nestle India's net profit for the quarter ended June rose seven percent on-year to Rs 746.6 crore, as against Rs 698.3 crore in the corresponding quarter of the previous year.

The FMCG major's revenue from operations for the April-June quarter rose to Rs 4,814 crore, up 3.3 percent compared to Rs 4,659 crore a year ago.

Nestle India's miss was due to surging food inflation, combined with the scorching heatwave. During the quarter, Nestle's domestic sales rose 4.2 percent, but volumes only rose by around one percent.

However, Nestle still sustained broad-based growth across segments, though revenue growth was low and five of the top 12 brands clocked double-digit growth.

Also Read | Nestle India Q1 results miss estimate, net profit rises 7% on-year to Rs 747 crore; shares fall

Nestle has seen a strong gross margin recovery (up 300 bps) in the last 12 months, therefore Motilal Oswal modeled a limited expansion in FY25. The brokerage reiterated its neutral rating with a target price of Rs 2,500 (based on 60x P/E Jun’26E) due to expensive valuations.

BofA Securities maintained its neutral call, with a target price of Rs 2,675 per share, as the results missed its estimates. The brokerage said that Nestle will have to navigate a very volatile commodity environment, but growth could improve over FY25. The efforts on expanding distribution and new products could likely provide support.

The management noted inflationary stress in select raw materials like coffee and cocoa (prices at an all-time high), whereas cereals and grains are through with structural MSP-backed cost increases. While the company has strong price power, strategy on inflation pass-through is key for margin and growth, especially amid double digit price growth in the base, noted Emkay Global.

The brokerage maintained valuation multiple at 65x (in line with its last 5Y average P/E) and retained its add call. However, it cut the target price to Rs 2,650/share from Rs 2,700/share earlier.

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