NESTLEIND

cut FY26/FY27 estimates by 4.4/6.8% given 1) pressure on Milk Products & Nutrition category (~38% of sales) due to muted growth in dairy and rising competitive intensity in low growth infant nutrition and 2) higher overheads /depreciation due to near doubling of gross block over last 3 years. NESTLE posted a weak quarter with 5.9% sales growth and flattish EBIDTA as margins declined 155bps given impact of elevated commodity prices (coffee, cocoa, milk and palmoil), higher operational costs (expansion in capacity) and drag in sales from Milk products and nutrition. We remain confident of doubledigit sales growth in Maggi, Nescafe (powder + RTD) and Chocolates (Wafers and milk chocolates). However, Maggi Noodles face rising competition from host of B2C brands in a fast-evolving category. Even after assuming 11.5% EPS CAGR post FY26, the stock trades at 63xJune27 EPS, which limits any meaningful upside. We cut the target price to Rs2392 (Rs2550 earlier) and rating from Accumulate to Hold given headwinds in a dairy and nutrition and premium valuations.