Neutral Nestlé India; target of Rs 2400: Motilal Oswal

Motilal Oswal recommended Neutral rating on Nestlé India with a target price of Rs 2400 in its research report dated January 31, 2025.

Broker Research

February 03, 2025 / 13:18 IST

Neutral

26 Aug, 2025 12:21

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Motilal Oswal's research report on Nestlé India

Nestle India (Nestle) reported a 4% YoY revenue growth (est. 5%) in 3QFY25. Domestic sales grew 3% YoY, hurt by a slowdown in urban consumption and higher commodity prices. Beverage, pet care, and KitKat delivered doubledigit growth, while Milkmaid, toddler range, Maggi noodles, and Masala-eMagic posted healthy growth. Part of the prepared dishes, milk products, and chocolates experienced weakness in 3Q. Export revenue rose 21% YoY. GM contracted 220bp YoY/20bp QoQ to 56.4% (est. 57.8%), leading to a flat GP YoY. RM inflation was high with coffee, cocoa, cereals, and grain prices remaining elevated. EBITDA margin contracted 110bp YoY to 23.4% (est. 24.1%). We model an EBITDA margin of 23.6% for FY25 and 24.2% for FY26. Nestle has been a revenue growth outperformer over the past three years (largely due to price hikes), but growth has slowed in the last three quarters. Moderating urban consumption and high food inflation pose risks to near-term recovery.

Outlook

The stock is trading at 63x/56x FY26/FY27 EPS. Given its expensive valuation, we reiterate our Neutral rating with a TP of INR2,400 (based on 60x P/E Dec'26E).

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