Nestlé India reported strong September-quarter results, with higher revenue and profit, but concerns over rising food inflation have prompted brokerages to revise their earnings estimates and target prices.
The company’s quarterly performance exceeded Bloomberg estimates, supported by strong sales growth and improved operating margins. However, analysts cautioned that inflationary pressures and a stronger comparison base could moderate growth in the coming quarters.
Macquarie and Goldman Sachs reduced their target prices and earnings estimates for Nestlé India, while Morgan Stanley retained its Equal-weight rating. The differing assessments reflect the balance between the company’s recent performance and concerns about future demand and costs.
Nestlé India Q2 results show strong growth
Nestlé India reported a 20.3% year-on-year increase in consolidated revenue to ₹6,788 crore for the September quarter, compared with ₹5,644 crore in the corresponding period a year earlier.
Earnings before interest, taxes, depreciation and amortisation (EBITDA) rose 31% to ₹1,615 crore from ₹1,232 crore. The EBITDA margin improved to 23.8%, compared with 21.8% in the year-ago quarter.
Net profit increased 36.4% to ₹1,027 crore, against ₹753 crore a year earlier.
The results exceeded Bloomberg estimates across key measures. Revenue was higher than the estimated ₹6,758 crore, while EBITDA surpassed the forecast of ₹1,574 crore. Net profit also came in above the estimated ₹1,008 crore.
Despite the earnings beat, the results have not removed concerns about the sustainability of growth as inflation affects household purchasing power and companies’ input costs.
Macquarie lowers target price and earnings estimates
Macquarie retained its Neutral rating on Nestlé India but reduced its target price to ₹1,570 from ₹1,575.
The brokerage acknowledged that the company maintained sales momentum during the September quarter. However, it expects growth to moderate as the impact of a stronger base becomes more pronounced.
Macquarie also highlighted rising inflation as a growing risk to rural demand. It noted that elevated valuations leave limited room for potential weakness in demand and margins.
The brokerage cut its earnings-per-share estimates for FY27, FY28 and FY29 by 4–5% for each year, citing inflationary pressures and greater volatility in commodity prices.
The revised estimates indicate that analysts are assessing not only the latest quarterly performance but also the potential effect of higher costs on future earnings.
Goldman Sachs also reduces target price
Goldman Sachs maintained its Neutral rating on Nestlé India while lowering its target price to ₹1,475 from ₹1,575.
The brokerage expects growth to moderate as the company moves beyond the benefit of a more favourable comparison base. It also noted that Nestlé India was a significant beneficiary of goods and services tax rate cuts, with growth accelerating from the December quarter.
Goldman Sachs reduced its earnings estimates for FY27, FY28 and FY29 by 2%, factoring in the possibility of slower growth.
Its assessment highlights the importance of separating the effect of recent tax-related changes and strong quarterly momentum from the company’s underlying growth outlook.
Morgan Stanley retains Equal-weight rating
Morgan Stanley maintained its Equal-weight rating on Nestlé India, with a target price of ₹1,538.
The brokerage described the September-quarter performance as an earnings beat and highlighted sustained revenue growth and improved margin delivery as positive factors.
However, it also identified rising food inflation as a key challenge for the company.
Morgan Stanley said the market reaction to the results appeared excessive. Its assessment differed from the more cautious revisions by Macquarie and Goldman Sachs, although all three brokerages recognised inflation as a factor to monitor.
The ratings and target prices represent the respective brokerages’ assessments and are not guarantees of future share-price performance.
Inflation remains a key risk for future growth
The central concern following Nestlé India’s results is whether strong sales growth and improved profitability can be sustained if food inflation and commodity costs continue to rise.
Higher prices can put pressure on consumer demand, particularly in price-sensitive markets. At the same time, increased input costs can affect margins if companies cannot fully offset them through productivity improvements, product mix or pricing measures.
For Nestlé India, analysts are also watching the possibility of growth normalising after recent momentum. A stronger base could make year-on-year comparisons more demanding in upcoming quarters.
The company’s September-quarter results demonstrate that revenue, profit and margins improved significantly. The brokerage revisions, however, show that analysts remain cautious about translating that performance into longer-term earnings expectations.
What investors should watch next
Investors will be monitoring future sales growth, the impact of inflation on demand, changes in commodity prices and the company’s ability to sustain margins.
The latest brokerage views show different assessments of Nestlé India’s valuation and near-term prospects. Macquarie and Goldman Sachs lowered their target prices while retaining Neutral ratings, whereas Morgan Stanley kept its Equal-weight rating and existing target price.
The key question is whether the company can maintain its growth and profitability as inflationary pressures persist and the comparison base strengthens. The next few quarters should provide more evidence on the durability of its recent performance.