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The company’s gross margin rose by 380 basis points (bps) YoY to 56.5%, a result of a stable raw material basket and higher net realization. Furthermore, the EBITDA margin expanded by 250 bps YoY to 24.8%, reflecting efficient cost control measures. According to InvestingPro, Nestle operates with a high return on assets, which is evident in these results.
The prices of raw materials, such as maize, sugar, oilseed, spices, and green coffee, can be influenced by a variety of factors. For instance, winter flush helps stabilize milk prices, while uneven and deficit rains can impact prices. Nestle’s ability to maintain a stable raw material basket, despite these fluctuations, is a testament to its strong position in the Food Products industry, as noted by InvestingPro.
In tandem with its financial results, Nestle India announced a share face value sub-division of rupee 1 per share. This strategic move is part of the company’s broader plan to strengthen distribution, capacity building, and category expansion for in-home and out-of-home products.
While the results are positive, Nestle India maintains its earnings per share (EPS) estimates. The company is valued at 52 times the price/earning on its September 25 expected EPS with a ‘Reduce’ rating. The target price is set at Rs 20,000, indicating limited medium-term upside due to rich valuation. This aligns with InvestingPro’s observation that Nestle is trading at a high P/E ratio relative to near-term earnings growth.
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