No Relief Yet: Emkay Reiterates ‘Reduce’ on Nestle India Share Price, Targets Rs 2,300

Emkay Global Financial Services has maintained a ‘Reduce’ rating on Nestlé India with a revised target price (TP) of Rs 2,300, while the current market price (CMP) stands at Rs 2,433.

The brokerage based its stance on persistent demand stress across key product categories and sustained input cost pressures.

“We retain REDUCE on Nestlé India and Mar-26E TP of Rs 2,300, on 60x P/E,” Emkay said in its note. “We see demand stress persisting in a major part of the portfolio, with demand for milk products continuing to see impact of healthy price hikes (amid inflation) and competitive pressure in prepared dishes.”

Nestle India Q4 Results FY25
Nestlé India’s Q4 topline growth was 4%, in line with expectations, while its EBITDA margin remained flat YoY at 25.5%, helping the company beat EBITDA estimates by 5%. However, earnings fell short, missing estimates by 4% due to a higher tax rate.

Demand continues to lag in core segments like milk products and prepared dishes, while beverage and confectionery portfolios showed double-digit growth, largely driven by pricing amid rising coffee and cocoa prices. Exports fell 8% YoY, and real internal growth was pegged at ~2%.

For FY25, overall sales grew 3%, with milk products declining by 3-4%. Encouragingly, the company has gained momentum in quick commerce, now contributing 8.5% of domestic sales.

Margin Outlook Stable; Leadership Transition May Spark Changes
While gross margins contracted by 100 bps YoY to 55.7%, Nestlé India maintained its EBITDA margin at 25.5%. Emkay anticipates flat margins for FY26, with slight improvement expected over the longer term—up to 24.8% by FY28.

“With the steady raw material inflationary setting sustaining, the company has been effecting price hikes. Given the stressed demand setting, we see the company’s call to pass on the pressure as prudent,” Emkay added.

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The brokerage projects an 8% sales CAGR and 12% earnings CAGR over FY25–28, introducing FY28 estimates in this report.

Valuations Remain Rich Despite Performance Hurdles
Despite the subdued outlook, Nestlé India continues to trade at a premium valuation of 63x P/E for FY27E, driven by strong brand equity, rural expansion, and premiumization efforts.

“We believe we will see actions from Aug-24 under the new leadership, toward enhancing growth with more India-focused launches and leveraging the parent brand portfolio,” Emkay noted.
 

As the company eyes a gradual recovery, Nestlé India share price could remain range-bound in the near term, awaiting clearer signs of demand revival and inflation easing.