Nestle India Q1 Review: Maggi, KitKat Fuel Sales — Margin Pressure Remains, Say Brokerages

Nestle India Ltd.’s Q1 FY26 results disappointed on the bottom line with all three major brokerages—Macquarie, Jefferies, and Morgan Stanley —flagging margin pressure and subdued performance in milk and nutrition segments. Despite the earnings miss, analysts highlighted strong growth in consumer favourites like KitKat, Maggi, and Milkmaid, alongside a robust surge in e-commerce and out-of-home consumption.

The company reported a 5.9% year-on-year revenue growth to Rs 5,096 crore, broadly in line with estimates. However, Ebitda fell 1.3% to Rs 1,100 crore, missing consensus expectations of Rs 1,181 crore. Net profit dropped 11.7% to Rs 659 crore, weighed down by higher input costs, operating expenses, and finance charges.

Macquarie maintained a ‘Neutral’ rating, citing a miss on Ebitda and margin pressures. “Nestlé India’s Q1 Ebitda came below our estimate as gross margin miss and higher other expenses offset largely inline sales,” the brokerage noted.

While Macquarie underlined the double-digit growth in beverages and confectionery, and the pickup in Maggi noodles, it raised concerns on other factors. “Commentary suggests another quarter of weakness in the key milk products and nutrition segment. Further, Nestle's comment of benign coffee prices raises concerns on pricing growth in beverages.”

On valuation, Macquarie cautioned, “We see limited upside at current 67 times FY27E earning per share.” The brokerage revised its target price down by 5% to Rs 2,250.

Jefferies echoed the margin concerns, but acknowledged resilience in other segments. “Nestlé reported MSD growth in revenues (inline with Jefferies estimate) with near equal contribution from volumes and realisation,” it said.

The brokerage highlighted that “Prepared Dishes & Cooking Aids, Beverages and Confectionery bounced back to volume-led growth." It highlighted the increased market share of KitKat and Nescafé.

Jefferies also stated the e-commerce channel now contributes 12.5% of domestic sales, driven by quick commerce and new launches.

However, it flagged a 250bps year-on-year contraction in gross margin, and a 13% year-on-year decline in net earnings, leading to a 4–5% EPS cut.

Jefferies retained its ‘Hold’ rating, citing “firm input prices and higher depreciation and interest charges.”

Morgan Stanley termed it a “big miss”, calling Q1 a “kitchen sink quarter” due to widespread margin compression. “Ebitda margin at 20.8%—a 3-year low—was due to inflation across commodities and higher opex,” it said.

The brokerage noted that “Prepared Dishes, Beverages and Confectionery returned to volume-led growth,” with Maggi and KitKat delivering double-digit growth. However, milk and nutrition remained muted, echoing concerns of peers.

Morgan Stanley also pointed to higher finance costs from temporary borrowings and a 250bps year-on-year drop in gross margin, leading to a 158bps decline in Ebitda margin. It did not change its rating, but flagged a “meaningful revision lower” to consensus EPS.

Outgoing MD Suresh Narayanan acknowledged the challenges. “The quarter was impacted by elevated consumption prices across the commodity portfolio and higher operating costs due to manufacturing expansion,” he said.

Nestle expects coffee prices to remain low, milk prices to decline, and cocoa and edible oil to stay stable, offering some relief ahead. The company also announced Manish Tiwary as the new CMD, effective August 1, marking a leadership transition after Narayanan’s decade-long tenure.