NESTLEIND

Posts Strong Sales Growth, but Margins Under Pressure in Q2FY26

Ltd recorded a return to double-digit revenue growth in Q2FY26 after eight quarters, providing optimism for investors. Total operating revenue rose 10.6% year-on-year (YoY) to ₹5,644 crore, surpassing market expectations. Domestic sales contributed ₹5,411 crore, while exports grew 14%. • The growth was led by prepared dishes, confectionery, and beverages, supported by festive season demand and strong promotional activity. • Analysts attributed the performance to Nestlé’s renewed focus on volume-driven growth under its new leadership. • Domestic sales rose 11%, aided by increased consumer spending and rural market traction. Margin Pressure: • Gross margin declined to 54.3% from 56.6% last year due to higher input costs and price hikes. • Despite some control over costs, Ebitda margin slipped 100 basis points YoY to 21.9%. • Net profit grew modestly by 1% YoY to ₹1,029 crore, constrained by elevated milk, staff, and logistics costs. Management Outlook: • Inflation easing and falling milk prices are expected to provide relief in the coming quarters, though edible oil costs may stay firm. • Analysts foresee limited margin expansion in the near term but expect steady volume-led growth as pricing pressures abate. Growth Drivers: • Smaller packs and targeted pricing strategies boosted market share, especially in rural areas. • Digital-first launches and premium products like Nescafe Gold and Maggi masala sustained urban demand. • New launches such as Purina Friskies (pet food) and Polo Sharebag added to portfolio momentum. Strategic Focus: Under new CMD Manish Tiwary, Nestlé aims to balance volume expansion and margin protection, while scaling newer segments like pet food and ready-to-drink beverages. Long-term confidence is reflected in its Sanand manufacturing expansion