Nestle India March Quarter Results Review - Robust Margin Performance; Maintain Accumulate: Dolat Capital

Dolat Capital Report

Nestle India Ltd.’s Q5 FY24 revenue came in-line with 8.9% YoY growth in domestic market, driven by pricing and mix led growth while exports grew 19.0% YoY. Revenue increased by 12.2% (on a four year compound annual growth rate basis).

Despite inflationary commodity prices, gross margin expanded 300 bps YoY to 56.8%. However, coffee, cocoa, cereals and grain prices saw high inflation. Milk prices are also expected to rise, due to harsh summers. The combined effect of these is expected to pressurize gross margin, in the near term.

We are introducing FY25/26E earnings per share estimates at Rs 37.9/42.7 (compared to Rs 36.8/41.7 for CY24/25E) due to change in reporting year from calendar year to financial year.

We believe Nestle’s growth rate and profitability will remain high, given its strong leadership and unique positioning in most categories. We continue to value the stock at 65 times FY26E EPS and maintain ‘Accumulate’ rating with revise target price at Rs 2,773 considering rich valuations. Buy on dips.

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