Buy Nestle India; target of Rs 2600: Sharekhan

Sharekhan's research report on Nestle India

Nestle India’s (Nestle’s) Q1FY26 performance missed expectations on profitability front as OPM declined 156 bps y-o-y to 21.6% (versus 23.5% expected), while PAT declined by 11.7% y-o-y to Rs. 659 crore (against expectation of Rs. 749 crore). Revenue grew by 6% y-o-y. Nestle sustained strong volume-led double-digit growth in Confectionery and Powdered & Liquid Beverages and posted volume-growth revival in Prepared Dishes & Cooking Aids. Margins were hit by consumption of high-cost inventory and increased operational costs. Going ahead, management has guided for stabilisation/correction in prices of key inputs - edible oil, cocoa and coffee, and expects milk prices to decline.

Outlook

Stock trades at 67x/59x its FY26E/FY27E EPS, respectively. We maintain a Buy rating with a revised PT of Rs. 2,600.

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