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Nestlé (NEST IN) reported a poor performance, bringing the half-year rise to 2.7%.
NEW DELHI:With domestic sales increasing just 1.2% in the second quarter, Nestlé (NEST IN) reported a poor performance, bringing the half-year rise to 2.7%. Weak consumption demand and a high comparison base from the prior year, which experienced a strong 12% rise in H1FY24, are to blame for this dismal performance.
Analysts have revised their FY25 projections as a result, although they are still upbeat about Nestlé’s varied portfolio and its prospects in the packaged and healthy food industries.
Nestlé (NEST IN) reported a disappointing performance, with domestic sales up just 1.2% in the second quarter, bringing the half-year increase to 2.7%. This poor performance can be attributed to weak consumption demand and a high comparative base from the previous year, which saw a robust 12% increase in H1FY24.
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Although they remain optimistic about Nestlé’s diverse portfolio and its potential in the packaged and healthy food industries, analysts have updated their FY25 predictions as a result.
Nestlé has created an action plan to revitalize underperforming brands in response to the difficult market conditions. Despite the wider demand issues, five of the company’s top 12 brands saw double-digit growth. With 8% of domestic sales and a 38% annual growth rate, new sales channels—especially eCommerce—have done well.
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Rising input costs are still an issue, though. EBITDA margins dropped 150 basis points year over year to 21.8%, below projections, while gross margins dropped 110 basis points from quarter to quarter to 56.4%. Although stability in milk and packaging costs offers some respite, Nestlé’s management continues to exercise caution due to the persistently high prices of coffee, cocoa, and other raw materials.
In light of these considerations, analysts have reduced their earnings projections for FY25 and beyond by about 10%. With a lowered target price of INR 2,600, down from INR 2,670, and a P/E ratio of 65 times estimated earnings for March 2027, they maintain a “Accumulate” rating despite the difficulties.
