Hold Nestle India; target of Rs 1394: Prabhudas Lilladher

Prabhudas Lilladher's research report on Nestle India We raise our FY27/FY28 estimates by 2.7%, driven by 1) strong growth momentum across segments supported by favorable macro policies 2) enhanced product availability with increased focus on premiumization 4) Robust rural distribution expansion given under indexed sales in rural India and 5) lower incremental depreciation and interest costs, as capex intensity appears to have peaked. Nestlé delivered a strong quarter, reporting 18.6% YoY revenue growth and 9.0% YoY EBITDA growth, with margins contracting 183 bps due to elevated input costs (coffee, cocoa, milk and palm oil). We expect growth momentum to sustain over the next few quarters, supported by peaked out prices of coffee and cocoa, low inflation, benefits of GST rate cuts and ample capacity post recent expansion. We believe Nestlé’s strategic focus on deeper penetration, premiumization, and innovation/new launches positions it to outperform peers in highly competitive ...