Reduce Nestle India; target of Rs 18,500: HDFC Securities

HDFC Securities recommended reduce rating on Nestle India with a target price of Rs 18,500 in its research report dated February 16, 2023.

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February 17, 2023 / 15:59 IST

26 Aug, 2025 12:21

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HDFC Securities' research report on Nestle India

Nestle reported a miss on revenue while the margin was ahead of expectations. Domestic revenue was up by 14/15% YoY in 4Q/CY22, delivering a three-year CAGR of 11%. However, Nestle witnessed ~2% YoY volume contraction in 4Q due to sustained inflation impacting demand in the semi-urban market (mainly LUPs). Volume deceleration was sharp as the company posted 8% volume growth in 9MCY22. Most packaged food companies delivered similar price-led healthy revenue growth with weak volumes. GM improved by 200bps QoQ but continued to contract by 200bps YoY to 55% (59% two years back). Cost control protected the EBITDA margin, which was up 20bps YoY to 23.4%, after contracting for the last five quarters. EBITDA grew by 14.5/6% YoY in 4Q/CY22. Nestle continued to focus on distribution strengthening, category expansion and capacity building (capex of INR 50bn planned for the next three years).

Outlook

We value Nestle at 52x P/E on Dec-24E EPS to derive a TP of INR 18,500. With a rich valuation, the absolute upside is limited in the medium term. Maintain REDUCE.

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