Nestle India’s Q3 FY26 results have drawn mixed reactions from brokerages, with strong volume growth and improving demand trends offset by concerns over margin pressure and elevated valuations.
The FMCG major reported an 18.5% year-on-year rise in revenue to a record ₹5,667 crore, while net profit jumped 46% to ₹1,018 crore, aided by a one-time tax write-back. EBITDA grew 9% year-on-year. However, operating margins narrowed due to a sharp 42% increase in advertising and promotion (A&P) spending. Following the results, Nestle India shares gained 3.5%. The stock has delivered over 15% returns in the past year, outperforming the Nifty 50.
Volume-Led Recovery, But Margins Under Watch
Most analysts described the quarter as one of Nestle India’s strongest volume upcycles in recent years, with broad-based growth across categories and channels. Improved demand elasticity and sustained consumption recovery were key highlights.
Read More: Dodla Dairy Expects EBITDA Margins to Recover to 8–9%.
However, stepped-up brand investments—while seen as strategically positive—have weighed on near-term profitability. Brokerages cautioned that aggressive A&P spending could delay operating leverage, even as it strengthens medium-term growth prospects.
Brokerage Views and Target Prices
- Nomura maintained a Buy rating with a target price of ₹1,450, implying nearly 9% upside from current levels. It cited strong volume and mix growth of around 16% year-on-year and noted that stable raw material costs are supporting sequential margin recovery. However, Nomura flagged valuation concerns, with the stock trading at about 60 times FY28 earnings.
- CLSA retained a Hold rating with a target price of ₹1,311. The brokerage said sales growth exceeded expectations, largely driven by volumes in the domestic business. It also raised FY26–28 earnings estimates by 3–5%, despite short-term margin pressure.
- Jefferies also maintained a Hold rating with a target price of ₹1,300. It highlighted the company’s strongest volume-led topline growth in nearly three years, with three out of four segments posting strong value growth. While margins were impacted by higher brand investments, Jefferies expects elevated A&P spending to support category expansion over the medium term.
Buy or Sell?
The Street appears divided. Bulls are betting on sustained demand recovery, premiumisation, and long-term brand strength. More cautious voices argue that much of the optimism is already priced in, given rich valuations and near-term margin compression.
For investors, the decision hinges on time horizon. Those with a long-term view may see current investments in brand-building as laying the groundwork for future earnings expansion. Short-term traders, however, may find limited upside until margin pressures ease or valuations cool off.
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