Neutral Nestle India; target of Rs 2400: Motilal Oswal

Motilal Oswal's research report on Nestle India

Nestle India (NEST) reported 9% YoY revenue growth (est. 8.5%) during the quarter ended Mar’24. The company has achieved 12% revenue CAGR over a five-year period (CY18-FY24). Domestic sales grew 9% YoY, well supported by pricing, mix, and volume growth. Export sales rose 19% YoY to INR2.3b for the quarter.GM expanded 300bp YoY to 56.8% (in line); GP was up 15% YoY. Input prices are witnessing inflationary pressures, with coffee and cocoa prices at all-time highs. Cereals, grains (MSP-led), and milk are also experiencing high inflation. NEST posted a strong gross margin recovery last year (up 300bp in the last 12 months); but FY25 may see some pressure on gross margin. EBITDA margin expanded 220bp YoY, while EBITDA rose 19% YoY to INR13.4b (est. INR12.8b).

Outlook

Reiterate Neutral with a TP of INR2,400 (based on 60x P/E Mar’26E) due to expensive valuations.

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