Nestle India in focus: Fast moving consumer goods (FMCG) major Nestle India has posted a steady performance for the fourth quarter of calendar year 2024 (Q4CY24), with an 8 per cent year-on-year revenue growth, slightly below the estimated 11 per cent, analysts noted. 

Despite this, the company has maintained a robust 10 per cent four-year compound annual growth rate (CAGR) in revenue. The growth in domestic sales, up 9 per cent year-on-year (YoY), was buoyed by pricing strategies, product mix optimisation, and volume expansion. However, export sales witnessed a decline of 5.6 per cent year-on-year to Rs 160 crore during the quarter.

Image Credits: Nestle 

Meanwhile, the company managed to expand its gross margin by 370 basis points year-on-year and 210 basis points quarter-on-quarter to reach 58.6 per cent, surpassing the estimated 56.8 per cent, brokerage firm Motilal Oswal said in a note. 

This growth in margin occurred despite challenges posed by uneven rainfall affecting the costs of maize, sugar, oilseeds, and spices. Conversely, stable prices of milk, wheat, and rice provided some relief. 

Nestle forecasts a gross margin of 57 per cent for financial year 2025/2026 (FY25/FY26), rebounding from 54 per cent in calendar year 2022 (CY22).

Its earnings before interest, tax, depreciation and amortisation (EBITDA) grew by 13.5 per cent year-on-year to Rs 1,130 crore, slightly below the estimated Rs 1,140 crore, the brokerage firm pointed out.

Nestle's relatively secure portfolio insulated it from heightened operating costs experienced by its FMCG peers. The company is anticipated to maintain an EBITDA margin of around 25 per cent for FY25/FY26.

The FMCG company has been strategically focusing on its RURBAN strategy, expanding its distribution network into untapped markets. This approach has yielded broad-based growth across its brand portfolio in recent years. The RURBAN strategy is to expand reach into small towns and villages

In terms of category performance, Nestle saw double-digit growth in its milk and nutrition segment, while prepared dishes and cooking aids also sustained commendable growth. The out-of-home (OOH) category showed acceleration through innovation and increased penetration in emerging channels.

Despite challenging market conditions, Nestle delivered strong performances in CY23, with net sales, EBITDA, and adjusted profit after tax (PAT) growing by 13 per cent, 20 per cent, and 25 per cent, respectively.

The company also declared a third interim dividend of Rs 7 per share and has approved a slump sale of its NBS Division to Purina PetCare India Private Limited, a 100 per cent subsidiary of Nestle SA., for Rs 79.8 crore.

Considering these factors, Motilal Oswal analysts reiterated ‘Neutral’ rating with a target price of Rs 2,400.

As of 11:00 am, shares of Nestle were trading 1.82 per cent lower at Rs 2,453.45 per share.