Geojit Investments has reaffirmed its BUY recommendation on Nestlé India Ltd, raising its target price to Rs 1,470, citing resilient brand strength, consistent volume growth, and a strong pipeline of product launches. While margin pressures emerged in Q2FY26 due to elevated input costs and higher employee expenses, the company’s diversified portfolio, premiumisation strategy, and expanding manufacturing capacity continue to support long-term earnings visibility. With domestic consumption holding firm, exports accelerating, and profitability expected to rebound into FY27, Nestlé India remains well positioned to compound value in India’s structurally growing packaged food market.

Q2FY26 Performance Reflects Demand Strength, Cost Headwinds

Nestlé India delivered a robust top-line performance in Q2FY26, with revenue from operations rising 10.6% year-on-year to Rs 5,644 crore, driven by healthy domestic volumes and a sharp recovery in exports.

Domestic sales grew 10.8% YoY to Rs 5,411 crore, supported by festive-led demand, strong traction in confectionery, beverages, and prepared dishes, and sustained momentum across both urban and rural markets. Export revenue increased 14.4% YoY to Rs 219 crore, led by rising international demand for Maggi noodles and improved distribution strategies.

However, profitability was tempered by cost inflation. EBITDA rose a modest 5.9% YoY to Rs 1,237 crore, while margins contracted 100 basis points to 21.9%, reflecting higher raw material costs, employee expenses, and operating overheads.

Profitability Impacted by One-Offs and Cost Dynamics

Reported profit after tax declined 23.6% YoY to Rs 753 crore, primarily due to a sharp rise in finance costs and a steep fall in other income. Finance costs increased 44% YoY, while other income dropped 76.1% YoY, amplifying the impact of margin compression at the operating level.

Importantly, operational execution remained disciplined, with quarter-on-quarter improvement in EBITDA and PAT highlighting management’s ability to respond swiftly to cost pressures. Sequential EBITDA grew 12.4% QoQ, while reported PAT rose 14.3% QoQ, indicating early signs of margin stabilisation.

Innovation Engine and New Product Launches Drive Volumes

Nestlé India’s growth strategy continues to be anchored in rapid innovation and portfolio refreshes. Management has accelerated product launch cycles, particularly in high-growth categories such as confectionery, beverages, prepared foods, and pet care.

Key highlights include:

Installation of a new Maggi noodles production line at the Sanand facility, reinforcing capacity expansion under the “Make in India” initiative

High double-digit growth in Munch and Milkybar, driven by effective youth-focused marketing

Expansion of the pet food portfolio with Purina Friskies Meaty Grills and Indoor Delights, supporting premiumisation

Scaling of Nestlé Professional (Out-of-Home) through partnerships with global and regional chains, including the ‘Made with KitKat’ range

These initiatives are strengthening brand relevance while widening consumption occasions across demographics.

Exports and Out-of-Home Channels Add Incremental Growth Levers

Exports have emerged as an increasingly meaningful contributor, with double-digit growth driven by strong demand for core brands in international markets. Management’s focus on targeted geographies and efficient distribution is enhancing export profitability and scale.

The Out-of-Home (OOH) segment continues to expand its footprint, benefiting from partnerships with cafés, quick-service restaurants, and institutional customers. This channel not only boosts volumes but also supports brand visibility and premium positioning.

Cost Outlook: Input Inflation to Ease, Select Pressures Persist

Management commentary suggests a mixed input-cost environment ahead. Milk prices are expected to soften post the festive season, while coffee prices may stabilise or decline. Cocoa supply-demand dynamics are improving, which could provide relief to confectionery margins.

However, edible oil prices are likely to remain firm or rise, indicating that margin recovery will be gradual rather than immediate. Geojit expects Nestlé India’s operational efficiency initiatives, affordability actions, and scale benefits to partially offset these pressures over the medium term.

Financial Outlook Shows Earnings Acceleration into FY27

Geojit projects a steady earnings recovery driven by operating leverage and margin normalisation.

Adjusted PAT is expected to grow 15.6% in FY27, with margins expanding to 24.0%, supported by scale benefits and improved cost efficiency.

Valuation, Target Price, and Investment Levels

Geojit maintains its BUY rating with a revised target price of Rs 1,470, valuing the stock at 74x FY27E earnings.

Current Market Price (CMP): Rs 1,314
Upside Potential: ~12% over 12 months

The valuation reflects Nestlé India’s superior return ratios, strong cash flows, and unmatched brand portfolio within the Indian FMCG space.

Bottomline: Strategic Investor Takeaway

Nestlé India remains a high-quality compounder in India’s consumer staples universe. While near-term margins face pressure from cost inflation and lower other income, the company’s structural strengths—brand equity, innovation depth, distribution scale, and pricing power—remain firmly intact.

For long-term investors, the stock offers a balanced risk-reward profile, with steady volume-led growth, improving earnings visibility, and resilience across economic cycles. Geojit’s reaffirmed BUY call underscores confidence in Nestlé India’s ability to deliver sustainable shareholder value over the medium to long term.