Maggi-maker Nestle India's June-quarter (Q1FY27) earnings left little room for criticism on operational performance, but not every brokerage believes that automatically makes the stock a buy.
While Jefferies described the quarter as "another blockbuster", it retained its Hold rating, arguing that much of the optimism is already reflected in the stock's valuation. Macquarie, meanwhile, highlighted stronger-than-expected sales and gross margins, saying favourable input costs should continue to support profitability.
The common thread across both brokerage notes was clear that the quarter was strong, but the debate has shifted from execution to valuation.
ALSO READ: Nestle India Q1 Result: Net Profit Jumps 48% To Rs 975 Crore, Revenue Up 25%
Brokerages Decode
Jefferies
- Maintained Hold and raised the target price to Rs 1,425 from Rs 1,325.
- Described the June-quarter performance as "another blockbuster quarter."
- Said growth was broad-based across product categories and sales channels.
- Expects growth rates to moderate from the second half of FY27.
- Believes there are better opportunities within the FMCG sector, adding that Nestle's valuation of around 70 times one-year forward earnings leaves little room for error.
Macquarie
- Maintained Neutral and increased the target price to Rs 1,575 from Rs 1,400.
- Said the company delivered a sales-led beat, supported by stronger gross margins.
- Expects gross margins to remain healthy.
- Said margins continue to benefit from strength in the higher-margin infant nutrition business and benign inflation across key input costs.
Nestle Q1 Performance
Nestle India reported a 48% year-on-year increase in net profit to Rs 975 crore for the June quarter, while revenue rose 25.2% to Rs 6,378 crore. EBITDA increased 39.7% to Rs 1,537 crore, with the EBITDA margin improving to 24.1% from 21.6% a year earlier.
The company said all product groups posted double-digit growth, supported by strong performance across channels. Exports grew 35.6% despite geopolitical headwinds, while advertising expenditure increased by over 40% as the company continued investing behind its brands.
Nestle said the Powdered and Liquid Beverages business recorded its 20th consecutive quarter of double-digit growth, while the confectionery, prepared dishes, nutrition and pet food businesses also delivered strong performances. General Trade registered double-digit growth across town classes, with rural markets leading the momentum.
On commodities, the company said coffee supply is expected to remain adequate, although short-term volatility may persist. It flagged continued pressure on cocoa and sugar due to weather-related disruptions, while edible oil prices remain stable at elevated levels. Wheat and milk are expected to remain range-bound, whereas dairy-based proteins continue to face inflationary pressure.
ALSO READ: Maggi To Nescafé: Nestlé Poised For Near-Term Upside As Morgan Stanley Bets On Double-Digit Growth
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