Motilal Oswal's research report on Nestlé India
Nestle India (Nestle) reported weak revenue growth of 1% YoY (est. 6%) in 2QFY25. Last eight-quarter average revenue growth was 10%. Domestic sales grew 1% YoY, impacted by muted demand and higher commodity prices. Beverage, toddlers’ range and milkmaid posted high double-digit growth, while KitKat saw high single-digit growth. Thereby, prepared dishes, parts of the milk products and chocolates would have been the key drag in 2Q. Export revenue increased by 3% YoY. GM was flat YoY at 56.6% (est. 57.0%). GP was up only by 2% YoY. Input prices are seeing inflation, with coffee and cocoa prices remaining elevated. Cereals, grains (MSP-led) and edible oil are also seeing inflationary trends. Prices are stable for milk and packaging. Due to a 6% increase in operating costs, EBITDA margin contracted by 150bp YoY. EBITDA declined 5% YoY to INR11.9b (est. INR13.4b). Lower other income (down 79% YoY) and higher depreciation (9% YoY up) further impacted profitability.
Outlook
The stock trades at an expensive valuation of 70x/62x FY25E/FY26E EPS. We reiterate our Neutral rating with a TP of INR2,400 (based on 60x P/E Sep’26E).
For all recommendations report, click here
Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
Find the best of Al News in one place, specially curated for you every weekend.
Stay on top of the latest tech trends and biggest startup news.
