Nestle Q3 Results Review - Ebitda Margin Surprises; Sales Outlook Healthy: Nirmal Bang

Nirmal Bang Report

While Nestle India Ltd.'s Q3 CY23 reported sales came in-line with expectations, the highest gross margin in the last seven quarters and the highest Ebitda margin in the last eight quarters led to mid single-digit beat in Ebitda and profit before tax. While the management has expressed caution on material costs, led by uneven rains and rain deficit, outlook on topline remains good in our view

There is no material change in our earning per share estimates for CY23E, CY24E and CY25E.

We remain constructive about the packaged food growth opportunity in India and Nestle (along with Britannia Industries Ltd.) has been at the forefront in driving growth for the past decade. Return on capital employed are also best-of-breed.

Nevertheless, expensive valuation of ~59 times led us to maintain 'Accumulate' rating on the stock.

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