Nestle India (NEST.BO) 1QFY27: Beat on all fronts, but valuations leave limited room for upside; Neutral

研报英文原文证据摘录

Nestle India (NEST.BO) 1QFY27: Beat on all fronts, but valuations leave limited room for upside; Neutral

Goldman Sachs Nestle India (NEST.BO)

especially during festive occasions.

EBITDA margin increased 250bps due to 210bps increase gross margin and ~40%

increase in ad spend: Nestle’s gross margin expanded 210bps YoY due to lower input

costs in 1QFY27. EBITDA margins increased 250bps YoY, despite the company raising

A&P spend by 40% YoY. Higher ad-spends was offset by lower other costs, like employee

cost, which came off as a percentage of sales from ~10% in 1QFY26 to 9% 1QF2Y27.

Nestle highlighted that their focus continues on operational cost savings. The resulting

structural cost efficiencies provided the necessary financial flexibility to reinvest in

brand equity (in terms of increased advertising expenditures, driving consumer

engagement) thereby strengthening market penetration and broadening distribution

networks.

Key input costs likely to witness inflationary trends ahead: Nestle expects coffee

prices to stabilize at lower levels as upcoming crops in Vietnam and Brazil appear to be

favorable. However, Nestle highlighted that cocoa and sugar prices remain elevated

impacted by El Nino as it continues to pressure next crop. Edible oil prices remain

elevated while protein complex faces inflationary pressure as demand from nutrition

and protein trends outpace supply expansion.

We raise our FY27/28 estimates, maintain Neutral due to elevated valuations: We

increase our FY27/28/29 EPS estimate by ~5-6% to build in higher-than-expected

growth and operating leverages from cost saving measures taken by the company. Our

12M target price changes to Rs 1,575 (from Rs 1,450) as we roll forward to Q5 to Q8

earnings. We maintain Neutral, due to elevated valuations.