Motilal Oswal's research report on Nestle India
Nestle India (Nestle) reported a 5.9% YoY revenue growth in 1QFY26, in line with our expectations. Domestic sales grew 5.5% YoY. We believe volume growth was in the low single digits. Nestle highlighted that, except for the Milk Products and Nutrition category, all other categories recorded volumeled growth. Export revenue grew 16% YoY, driven by strong performance in Foods, Coffee, Instant Tea, and Breakfast Cereals. GM contracted 250bp YoY/100bp QoQ to 55.2% (est. 57%), given the inflationary commodity prices. Management indicated that Coffee, Cocoa, and Edible Oil prices are expected to remain range-bound, while milk prices will likely cool off. EBITDA margin contracted 130bp YoY to 21.9%, the lowest in the past 12 quarters, due to elevated operating costs. We model an EBITDA margin of 23.6% for FY26 and 24.5% for FY27.
Outlook
The stock is trading at 69x/60x FY26/FY27 EPS. Given its expensive valuation, we reiterate our Neutral rating with a TP of INR2,400 (based on 60x P/E Jun'27E).
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