Nestle India Q2 Review — Topline Spurt Excites; Margins Still Subdued; Valuation Lofty, Says Systematix

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Systematix Report

We raise our FY26E-FY28E revenue estimates for Nestle India Ltd. by 1% but lower PAT estimates by 6-7% to factor in a protracted period of subdued margins, and build FY25-FY28E revenue/ PAT CAGR of 10%/9%.

We maintain Hold rating on Nestle; We roll over valuation to September-2027E (from June-2027E) and value Nestle at a P/E of 65x, in-line with its long-period average, for an unchanged target price of Rs 1,250.

We see significant positives emerging for Nestle, with-

1. volume-led turnaround in the key Maggi portfolio,

2. sustained strong growth in beverages and confectionery, and

3. recovery in key categories of milks and nutrition.

However, we remain watchful of-

1. consistency in volume growth delivery,

2. volatile input-cost inflation and

3. lofty valuations (stock trading at P/E of 71x on FY27E EPS).

Product innovations should continue to support growth, punctuated by launches in breakfast cereals (Munch Choco Fills), RTD coffee, noodles (spicy range), millet-based foods (oats noodles), toddler foods, chocolates (KitKat variants) and pet foods.

We remain positive on sequential gross profit margin benefits from-

1. high pricing power in key categories supported by leadership positions,

2. premiumization-led mix improvement (evident in confectionery, coffee) and

3. innovative product launches in new categories.

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