Shares of Nestle India on Friday fell 2 per cent following q2 results. The largecap FMGC stock opened in the green at Rs 2,380 versus the previous close of Rs 2,378.70. Post a positive start, the counter faced selling pressure as it made a low of Rs 2,326.10, down 2.21 per cent. Around 12:45 PM, the stock traded in the red with a cut of 1.20 per cent at Rs 2,349 with 7.37 lakh equities changing hands.
The dip in the FMCG player came after the company reported a consolidated net profit of Rs 899 crore for the quarter ended September 30, 2024, slightly down from Rs 908 crore reported in the same period last year.
This marks a decrease of nearly 1% year-on-year. However, the net profit after tax was above the Street estimate of Rs 852 crore.
The revenue from operations in the reported quarter stood at Rs 5,104 crore, reflecting a 1.3% increase compared to Rs 5,037 crore in the corresponding quarter of the previous financial year.
On a standalone basis, the PAT for the reported quarter was Rs 986 crore, marking an 8.5% increase from Rs 908 crore in the same period last year.
What Should Investors Do?
Motilal Oswal has tagged NEUTRAL rating in Nestle India and cut its EPS estimates by 6 per cent for FY25 and 4 per cent for FY26 due to weak revenue growth and margin moderation. It has set a target of Rs 2,400.
On the other hand, Nuvama has maintained BUY rating but reduced the target to Rs 2,870 from Rs 2,965. It said that the Q2 revenue and EBITDA disappointed the Street. The domestic sales was impacted by urban consumption slowdown and muted demand in Maggi Noodles and infant nutrition. It said that the company may have to take corrective actions for its underperforming segments—leading to gradual recovery.
Emkay downgraded Nestle to a ‘reduce’ rating from an earlier ‘add’ with a target price of Rs 2,400.
The downgrades came amid sustained topline pressures. Q2 result was weaker than the Street and Emkay’s expectations. Amid inflationary stress, Nestlé India’s core categories saw demand pressure. Factoring in a muted topline show in 1H, Emaky has lowered the revenue expectations by 3 per cent over FY 25-27 and cut its earnings by 8 per cent for FY25E and 3 per cent over FY26-27E.
ICICI Securities maintained its hold rating on the stock while cutting the target price to Rs 2,350 from Rs 2,500.
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Nestle’s Q2FY25 revenue growth was disappointing, and further de-accelerated to 1 per cent YoY (vs 4 per cent in Q1FY25) due to subdued consumer demand. With higher prices of key raw materials (cocoa, coffee, etc.), margins are likely to remain under pressure but Nestle appears to have a market share gain opportunity given the relative immunity from cocoa inflation as its key brands have lower cocoa content vs competition.
