Nestle Q4 Results Review: Analysts See Limited Upside Amid Headwinds
Nestle has exceeded expectations with a robust 9% year-on-year revenue growth, outperforming forecasts by 2%.
Morgan Stanley and CLSA have raised the target price, while Emkay retained it on Nestle India Ltd. Brokerages, however, expect headwinds to growth and margins in financial year 2025, underscoring that expensive valuations limit the upside.
Net profit of the Cerelac and Maggi maker rose 27% to Rs 934 crore in the quarter ended March, according to an exchange filing on Thursday. That compares with the Rs 837.9-crore consensus estimate of analysts tracked by Bloomberg.
Brokerage Views
Morgan Stanley
Rates Nestle India 'underweight' while raising target price to Rs 1,990 apiece from Rs 1,981, implying a downside potential of 22%.
Nestle earnings were ahead of their consensus estimates by 9–10%.
Sees headwinds to growth and margins in fiscal 2025.
Two new business initiatives are positive.
CLSA
Rates 'underperform' and raises target price to Rs 2,719 from Rs 2,665 apiece, an upside potential of 6%.
Top-line growth stays similar to the December quarter, led by pricing and mix.
Estimates volumes remained flat during the quarter.
Continues to expect the food and beverages segment within staples to outperform.
Nestle's expensive valuations limit upside.
Increased 2025–26 earnings estimates by 2%, factoring in the margin beat.
Emkay Global
Maintains 'reduce' rating with a target price of Rs 2,600 apiece, an upside of 1.4%.
Reduce call on Nestle is a factor of valuations.
Sees compound annual growth rate of 11% each in topline and earnings in fiscal 2025–26.
Positives priced in, still stock offers little upside despite the generous valuations.
Of the 9% earnings beat, 4% was driven by higher exports and 5% by better margins.
Sees enhanced thrust on innovations and strengthening segments.
Distribution efforts in rural areas are likely to reflect the growth in recovery.
Sixteen of the 38 analysts tracking Nestle India have a 'buy' rating on the stock, 14 recommend a 'hold' and eight suggest a 'sell', according to Bloomberg data. The average of 12-month analyst price targets implies a potential upside of 3.9%.
Shares of Nestle were trading 1.24% lower on the NSE, compared to a 0.07% decline in the benchmark Nifty at 10.05 a.m. It has risen 19.8% in the last 12 months but has fallen 5.17% year-to-date.