Nestle faces tougher H2 as inflation clouds outlook

Revenue rose 20.3% and profit grew 36% in the September quarter, but analysts expect volatile commodity prices and rising inflation to weigh on demand and margins. Ebitda margin expanded 200 basis points year-on-year to 23.8%, while gross margin rose 270 basis points to 56.9%. Advertising and marketing expenditure, however, surged 46% as the company stepped up brand investments. Rising inflation also poses a risk to rural demand in the second half,” Macquarie said in a report on Friday.

The brokerage retained its neutral rating but lowered its target price to Rs 1,570 from Rs 1,575. It also cut its earnings-per-share estimates for FY27, FY28 and FY29 by 4-5%, factoring in inflationary pressures and commodity-price volatility. Goldman Sachs retained its neutral rating but reduced its target price to Rs 1,475 from Rs 1,575, citing the prospect of slower growth as the benefits of goods and services tax (GST) cuts feed into a higher base.

“Nestle India was among the beneficiaries of the tax changes, which helped accelerate growth from the December quarter onwards. The trajectory may change from Q3 of FY27,” it said in its latest report. The brokerage lowered its earnings estimates for FY27, FY28 and FY29 by 2%. Morgan Stanley, however, maintained its equal-weight rating and a target price of Rs 1,538, citing sustained revenue momentum and margin delivery.

It flagged food inflation as a key challenge, and said the stock’s reaction to the results excessive. Nomura retained its buy rating but cut its target price to Rs 1,535 from Rs 1,675, signalling caution over future earnings. Nestle India Chairman and Managing Director Manish Tiwary said the company recorded broad-based growth across product groups in Q2, supported by double-digit volume growth. “Rising inflation, particularly food inflation, however, is a reality,” he said, adding that innovation, productivity improvements and operational efficiencies would help mitigate commodity-cost pressures.

6%; Rs 25 interim dividend declared In its commodity outlook, the company said coffee and wheat prices were expected to remain range-bound, while sugar and edible oil prices had stabilised at elevated levels. Cocoa remained volatile amid weather-related concerns in major producing regions. Milk prices had strengthened seasonally but were expected to ease with the arrival of flush supplies. The outlook highlights the challenge ahead: sustaining growth while protecting margins as inflation pressures consumers and a tougher base raises the bar for performance in the second half of FY27.