Nestle India delivered a robust operational performance in the December quarter, with strong volume-led growth reinforcing confidence in its medium-term prospects even as margin pressures persisted. Brokerages firms Citi and Jefferies, raised their target prices following the results, though views remain split on valuation comfort.
On a standalone basis, Nestle India reported an 18.6% year-on-year rise in revenue to Rs 5,667 crore, compared with Rs 4,780 crore a year ago. EBITDA grew 9% YoY to Rs 1,202 crore, while margins declined to 21.2% from 23.1%, reflecting input cost pressures and higher investments. Net profit jumped 46.2% YoY to Rs 1,018 crore, aided by an exceptional gain of Rs 156 crore during the quarter.
Brokerages described the quarter as Nestle India's strongest top-line performance in nearly three years, with growth largely driven by volumes and ranking among the best in class within the FMCG space.
Structural Growth Drivers in Focus
Analysts across the Street see signs of a more durable recovery in Nestle India's growth profile. Citi highlighted that the milk products and nutrition segment has recovered to a mid-single-digit growth trajectory, pointing to improving category health. Both Citi and Jefferies noted that the company managed trade destocking effectively in the previous quarter, limiting the likelihood of any restocking-led boost to Q3 numbers.
Citi also believes that GST-led formalisation gains across Nestle India's categories are structural, which could support stronger medium-term growth and justify premium valuations. Reflecting this confidence, the brokerage maintained a Buy rating and raised its target price to Rs 1,600 from Rs 1,500, citing growth acceleration and improving category fundamentals.
Jefferies, while acknowledging the impressive topline momentum, remained more cautious on valuations. The brokerage retained a Hold rating but increased its target price to Rs 1,300 from Rs 1,250, recognising the breadth of growth across the portfolio.
Margins Under Pressure, Investments Step Up
Margin performance remained the key area of concern in the quarter. Jefferies flagged that gross margins continued to contract due to elevated input costs, leading to a sharp EBITDA margin contraction of over 180 basis points year-on-year.
However, analysts found comfort in the quality of spending. Jefferies noted that the margin compression was driven by higher brand investments, a move it sees as supportive of Nestle India's competitive positioning and growth over the medium term.
Nestle India's Q3 performance has reinforced confidence in its volume growth engine and structural tailwinds, even as margin pressures temper near-term enthusiasm. While Citi sees scope for premium valuations to sustain, Jefferies remains cautious, underscoring that execution on margins will be the key monitorable going ahead.
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