Accumulate Nestle India; target of Rs 2448: KR Choksey

KR Choksey's research report on Nestle India

For Q3FY25, NEST’s revenue increased 3.9% YoY (-6.4% QoQ) to INR 47,797 Mn, largely in line with our estimates by (-1.2%). EBITDA decreased 2.2% YoY (-7.1% QoQ) to INR 10,846 Mn, missed our estimates mainly due to higher-than-expected operating expenses. EBITDA margin contracted 143 bps YoY (-19 bps QoQ) to 22.7%. Adj. net profit decreased 11.5% YoY (-4.0% QoQ) to INR 6,877 Mn, missing our estimates mainly due to the cascading effect of lower EBITDA and higher than expected depreciation expenses. We lower our FY26E/FY27E EPS by 2.0%/2.0%, respectively, on the back of weaker-than-expected Q3FY25 performance and urban slowdown risks. However, long-term growth remains strong, supported by innovation, premiumization, capacity expansion, and ecommerce momentum. We expect Revenue/EBITDA/Adj. PAT to grow at a CAGR of 8.5%/8.7%/7.3%, respectively, over CY23-FY27E. The stock is currently trading at 60.6x/59.2x to our Adj.

Outlook

EPS estimate for FY26E/FY27E, respectively. We roll over our valuation to FY27E, assigning a P/E multiple of 63x on FY27E EPS of INR 38.9 (previously: 39.6), resulting in a target price of INR 2,448 (previously: 2,524). Subsequently, we maintain our ‘ACCUMULATE’ rating on the shares of Nestle India Ltd.

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