Reduce Nestlé India; target of Rs 2400: Emkay Global Financial

Emkay Global Financial recommended reduce rating on Nestlé India with a target price of Rs 2400 in its research report dated October 17, 2024.

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October 18, 2024 / 11:41 IST

reduce

26 Aug, 2025 12:21

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Emkay Global Financial's research report on Nestlé India

Q2 result was weaker than street and our expectations, wherein sales growth was 1% (5% below expectations) and adjusted earnings declined 9% (14% below expectations). EBITDA margin saw 150bps YoY contraction amid surge in A&P spends; gross margin remained steady at 56%. Amid inflationary stress, Nestlé India’s core categories saw demand pressure. Factoring in muted topline show in 1H, we lower revenue expectations by 3% over FY25-27. We cut our earnings 8% for FY25E and ~3% over FY26-27E. The recent stock correction has priced in near-term pressure, reflecting in 1Y fwd P/E at 62x near -1 SD (5Y avg).

Outlook

We downgrade Nestlé India to REDUCE from Add with a 14.3% cut in TP to Rs2,400 amid sustained topline pressures; our target valuation multiple reduces to 60x (~10% discount to last 5Y avg. fwd. P/E of 67x).

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