Nestle India: Target Price Set at Rs 1504 by Prabhudas Lilladher

Nestle India Sees Strong Growth, Boosts Estimates and Rating

Nestle India has reported a strong quarter, with revenue growth and EBITDA growth exceeding expectations. The company's research report by Prabhudas Lilladher highlights a 22.6% year-over-year (YoY) revenue growth and a 27.5% YoY EBITDA growth, with margins expanding 101 basis points led by operating leverage despite elevated input costs (SMP & palm oil).

The report notes that Nestle's sales momentum is expected to sustain in the first half of FY27 due to a relatively low base, although growth numbers are unlikely to match those of the fourth quarter in FY26. The company will also benefit from lower prices of coffee (down 25% from peak) and cocoa in FY27, even as palm oil and packaging costs are expected to increase.

The report highlights several key factors driving Nestle's growth, including innovations, distribution expansion, and the benefits of its INR50 billion capacity expansion over the past few years. As a result, Prabhudas Lilladher estimates that Nestle will sustain double-digit growth and expects an earnings per share (EPS) compound annual growth rate (CAGR) of 14.3% over FY26-28.

Read also: Treasury Yields Experience Largest Increase in Two Weeks Following Release of Labor Market Data

Key Statistics

The stock currently trades at 59.5x FY28 EPS, but Prabhudas Lilladher remains positive operationally and raises its DCF-based target price to INR1,504 (INR1,379 earlier). This adjustment is driven by the company's strong performance and the benefits of its capacity expansion, which are expected to continue driving growth in the coming years.