Nestle India shares fell on Thursday despite a 48% year-on-year profit rise for the June quarter. While the FMCG giant reported revenue growth of 25%, brokerages remain divided over the stock's valuation. Investors are weighing the company's strong performance against its premium price in the current market.
Detailed Coverage
Nestle India saw its stock price decline in early trade on Thursday, despite announcing strong financial results for the first quarter of the 2027 fiscal year. The company reported a consolidated net profit of ₹958.7 crore for the June quarter, representing a 48% jump compared to the same period last year. Revenue from operations also showed a strong upward trend, rising 25% to reach ₹6,378.2 crore.
Financial Performance and Operational Growth
The company's standalone profit after tax reached ₹975.1 crore, which exceeded market expectations. Sales also grew by 25.4%, fueled largely by a 25% increase in domestic demand. Management noted that growth was broad-based, with double-digit gains across all major product categories and sales channels. A key driver for this quarter was the 35.6% growth in exports, which remained resilient despite global geopolitical challenges. To support this growth, the company increased its spending on advertising by over 40% year-on-year while maintaining a solid EBITDA margin of 24.2%.
Differing Brokerage Outlooks
Despite the positive earnings, market analysts remain split on the stock's future direction. Nomura retained a positive outlook, citing the company’s ability to deliver consistent earnings growth for three consecutive quarters. The brokerage highlighted that the company achieved strong sales and margin expansion even while increasing marketing costs, which it views as a sign of effective business execution. However, Nomura also cautioned that growth may moderate later in the fiscal year as the base effect of these strong results becomes more challenging to sustain.
Meanwhile, HSBC maintained a cautious stance, keeping a 'Hold' rating on the stock. While acknowledging the recovery in the milk nutrition business and broader revenue success, the firm pointed to the stock's valuation as a primary concern. The brokerage noted that the premium price investors pay for the stock limits further upside potential, suggesting that the recent price gains may have already captured much of the positive news. For investors, the key area to monitor moving forward will be how the company manages volume growth in the coming quarters and whether it can maintain its profit margins while facing the expected normalization of the base effect.