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Nirmal Bang Report
Nestle India Ltd. reported weaker-than-expected numbers on all fronts for Q1 FY25. Volume growth is likely to have been ~1% YoY, which continues the disappointing trend of the past two years, especially on Prepared Dishes, something we had highlighted in our annual report analysis last month.
Given that a major domestic acquisition is unlikely, it is important that there is a step-up in innovation. Earlier this month, we had highlighted about the portfolio that Nestle has in other Emerging Markets in a detailed note, some of which could potentially come to India eventually. For the quarter, 30% of incremental growth in prepared dishes (albeit growth is likely to have been modest in Q1 FY25) coming from innovation is a positive.
We remain constructive about the packaged foods growth opportunity in India and Nestle (along with Britannia Industries Ltd.) has been at the forefront in driving growth for the past decade.
Nestle's return on capital employed is also the best-of-breed. Nevertheless, expensive valuation of ~60 times FY26E EPS makes us maintain Accumulate rating on the stock.
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