Nestle India Share Price: Growth Vs Valuation debate splits street down the middle

Shares of Nestle India fell more than 2% on Thursday, July 23, after the fast-moving consumer goods (FMCG) major reported another quarter of better-than-expected earnings for the June quarter. However, despite the strong earnings performance, the growth vs valuation debate has split the 40 analysts who track the company right down the middle.

Citi sees the highest upside on Nestle India

Citi maintained its "Buy" rating on the stock and raised its price target to ₹1,750 from ₹1,660, implying an upside of around 17% from Wednesday's closing price of ₹1,493.60.

The brokerage said Nestle India delivered its third consecutive "beat-and-raise" quarter, with revenue, EBITDA and net profit growing 25%, 40% and 49%, respectively.

According to Citi, the growth was led by strong volumes across all four business segments and supported by rural distribution expansion, robust e-commerce momentum, accelerated premiumisation and sustained investments in advertising and promotion.

Nomura says third blowout quarter in a row

Nomura reiterated its "Buy" rating with a price target of ₹1,675, implying an upside of about 12%.

The brokerage described the June quarter as Nestle India's third blowout quarter in a row and the fourth consecutive earnings beat. It noted that sales grew 25% year-on-year, ahead of both its own and consensus estimates, while gross and operating margins expanded significantly despite higher advertising expenditure.

Nomura expects growth rates to moderate from the second half of FY27 as the company begins lapping a higher base but believes Nestle India will continue to outperform peers.

CLSA maintains 'Outperform' rating

CLSA reiterated its "Outperform" rating with a target of ₹1,638, implying an upside of nearly 10%.

The brokerage said revenue growth of 25.4% was driven by volume growth and exceeded both CLSA and consensus estimates. It also noted that all business segments delivered strong double-digit growth.

According to CLSA, premiumisation, supported by the increasing contribution of the quick commerce channel, remained a key driver of sales growth. The brokerage raised its FY27-FY29 earnings estimates by 4% - 7% to reflect stronger sales and profitability.

HSBC Cautious On Valuations

HSBC maintained its "Hold" rating on Nestle India with a price target of ₹1,480, implying a downside of around 1% from Wednesday's close.

While the brokerage acknowledged that Nestle India delivered a 25% year-on-year revenue growth, beating both its estimates and consensus, it said the revival in the milk nutrition business came on a favourable base and may not be sustainable. HSBC also retained its premium 60-times forward price-to-earnings valuation on the stock.

The company reported revenue of ₹6,378 crore for the June quarter, up 25.2% year-on-year and ahead of the CNBC-TV18 poll estimate of ₹6,065 crore. Net profit climbed 48% to ₹975 crore from ₹659 crore in the year-ago period.

Earnings before interest, tax, depreciation and amortisation (EBITDA) rose 40% to ₹1,538 crore, while EBITDA margin expanded to 24.1% from 21.6% a year ago.

The strong performance was driven by broad-based volume growth, with all product segments posting double-digit growth. Domestic sales increased 25%, while exports rose 35.6%. The company also delivered margin expansion despite a more than 40% increase in advertising and promotion (A&P) spending, supported by cost savings and operating leverage.

Street remains constructive on Nestle India

Among the 40 analysts who have coverage on Nestle India, 20 have a "buy" rating. Among the other 20, 15 have a "hold" rating and the remaining five have a "sell" recommendation.

Shares of Nestle India are trading 2.4% lower on Thursday at ₹1,457.8. The stock had ended 3% higher on Wednesday after the results announcement.