Nestle India Ltd.'s September-quarter earnings beat Bloomberg estimates, but brokerages flagged rising food inflation and the risk of slower growth in the coming quarters. Macquarie and Goldman Sachs cut their target prices and FY27-FY29 earnings estimates, citing pressure on demand and margins as a stronger base kicks in. Morgan Stanley retained its Equal-weight rating, saying strong sales growth and margin delivery remained positives despite inflation concerns.
Macquarie expects recent sales momentum to moderate as the base effect sets in and sees rising inflation as a growing risk to rural demand. Goldman Sachs also expects growth to moderate, noting that Nestle was a major beneficiary of goods and services tax rate cuts and saw growth accelerate from Q3. Morgan Stanley said the quarter's performance was positive but maintained that rising food inflation remained a key challenge.
Nestle India Q2 Results Highlights (Consolidated, YoY)
- Revenue rose 20.3% to Rs. 6,788 crore from Rs. 5,644 crore. (Bloomberg estimate: Rs. 6,758 crore)
- EBITDA increased 31% to Rs. 1,615 crore from Rs. 1,232 crore. (Estimate: Rs. 1,574 crore)
- EBITDA margin stood at 23.8% versus 21.8%. (Estimate: 23.3%)
- Net profit rose 36.4% to Rs. 1,027 crore from Rs. 753 crore. (Estimate: Rs. 1,008 crore)
Here's What Brokerages Are Saying After Nestle India Announced Q2 Results
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Macquarie
- Maintained 'Neutral'; Target price cut to Rs. 1,570 from Rs. 1,575
- Acknowledged that sales momentum extended into Q2 but flagged the risk of moderation.
- Expects growth to moderate as a stronger base kicks in.
- Warned that rising inflation poses a growing risk to rural demand.
- Said elevated valuations leave limited room for demand and margin risks.
- Cut FY27, FY28 and FY29 earnings-per-share estimates by 4-5% each, factoring in inflationary pressures and a more volatile commodity environment.
READ | Nestle Q2 Results: Profit Surges 36%, But Rising Costs Remain A Concern
Goldman Sachs
- Maintained 'Neutral'; Target price cut to Rs. 1,475 from Rs. 1,575
- Expects growth moderation as the base effect sets in.
- Said Nestle was a major beneficiary of GST rate cuts, with a significant acceleration in growth starting Q3.
- Cut FY27, FY28 and FY29 earnings estimates by 2% to factor in expected growth moderation.
Morgan Stanley
- Maintained 'Equal-weight'; Target price at Rs. 1,538
- Described Q2 as an earnings beat, with strong top-line growth momentum sustained.
- Said continued growth momentum and margin delivery were positives.
- Flagged rising food inflation as a key challenge.
- Said the day's stock-market reaction appeared overdone.
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