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Informist, Monday, Oct. 13, 2025

 

By Avishek Rakshit

 

KOLKATA – An improvement in urban demand and price increases for key products such as coffee and premium chocolates are expected to boost Nestle India Ltd.'s financial performance in the September quarter, although high coffee procurement prices may keep its margins under pressure, according to analysts.

 

The cut in the Goods and Services Tax is also expected to negatively impact the revenue of the country's largest instant noodles maker, as its sales channels destocked products, which were stocked up at higher tax rates before Sept. 22 — the day the new GST rates kicked in.

 

The company, which sells the Maggi brand of instant noodles and the Nescafe brand of instant coffee, is expected to report a 3.7% on-year increase in its net profit for the September quarter to INR 7.2 billion. The revenue is expected to increase by 4.5% on year to INR 53.3 billion, according to the average of estimates from 11 brokerages. The Indian arm of the world's largest food company, Nestle S.A., will declare its results for the September quarter on Thursday.

 

On a sequential basis, the net profit is likely to rise by 9.4% and the revenue is expected to increase by 4.6%. Emkay Global Financial Services Ltd. has the highest estimate for net profit at INR 7.7 billion and Systematix Shares and Stocks (India) Ltd. has the lowest at INR 6.7 billion. The highest estimate for revenue is by YES Securities (India) Ltd. at INR 54.2 billion and the lowest is by JM Financial Institutional Securities Pvt. Ltd. at INR 52.5 billion.

 

The company's top-line growth in the September quarter is estimated to be driven by both sales volume and price hikes, brokerages said. Kotak Institutional Equities estimates the company's tonnage growth — a reflection of total sales volume by weight – at around 1% only, but the price-driven revenue growth may be higher at 2.3%. Nestle had increased coffee prices due to higher procurement costs in the September quarter and this may have a positive bearing on the company's top line.

 

However, brokerages vary on the estimates for Nestle's sales volume and price-led top-line growth. For instance, JM Financial estimates a higher volume growth of 3.4% while Nuvama Wealth Management Ltd. sees the volume growth at a conservative 1% but cites a 3% price-led revenue growth.

 

Despite price hikes resulting from continued higher coffee prices, demand for Nescafe remained stable in key states in southern India where coffee consumption is high. At the same time, demand for Maggi noodles remained stable and there was a slight uptick in demand in the eastern region of the country during September, retailers in Kolkata said. However, incessant rains and floods in northern West Bengal and Sikkim, which are important markets for instant noodles, disrupted the supply chain to some extent during the peak monsoon, retailers said.

 

Even as Nestle's domestic business in India, which accounts for 95% of its annual revenue, is expected to have been impacted on account of channel destocking and low volume growth, its exports are expected to have fared better. Nuvama expects export revenue to have grown 5-6% on year in the September quarter, whereas Kotak pegged the export revenue growth much higher at 15% on year.

 

Nestle's margins in the September quarter are likely to have come under pressure. Nuvama said that given the fact that coffee costs are near an all-time high, gross margins may decline by 132 basis points to 55.3% and earnings before interest, tax, depreciation, and amortisation margins may fall 68 basis points to 22.2%. JM Financial estimates the gross margins to decline by 190 basis points.

 

Apart from the higher input costs of coffee, the company also faced higher costs for cocoa, dairy, and edible oils, which is expected to pull down gross margins by 100 basis points to 55.6% resulting in the EBITDA margin contracting by 100 basis points to 21.9%, Kotak said.

 

Nestle is expected to report an EBITDA of INR 11.7 billion in the September quarter, according to the average of estimates. Emkay's estimate for EBITDA is the highest at INR 12.3 billion and JM Financial's estimate of INR 11.1 billion is the lowest.

 

Monday, shares of Nestle ended at INR 1,188.10 on the National Stock Exchange, down 1.0% from the previous close. The shares are up 2.3% since the company announced its June quarter earnings in July.

 

Of the 18 research reports on the company available with Informist, seven have a 'buy' rating on the stock at an average target price of INR 2,611.9. Nine brokerages have a 'hold' rating on the stock at an average target price of INR 2,176.2 and two have a 'sell' rating on the scrip.

 

The following are the Jul-Sept earnings estimates for Nestle India from 11 brokerages in descending order of the estimate of net profit in INR million:

 

Broker Name	Net Sales (in INR million)	Net Profit (in INR million)	EBITDA (in INR million)
Emkay Global Financial Services Ltd	53,585	7,715	12,276
YES Securities (India) Ltd	54,171	7,562	12,188
Nirmal Bang Equities Pvt Ltd	53,636	7,458	11,961
Nomura Equity Research	54,028	7,404	11,752
Elara Securities (India) Pvt Ltd	52,832	7,350	11,222
Motilal Oswal Financial Services Ltd	53,732	7,306	11,955
Nuvama Wealth Management Ltd	52,570	7,137	11,671
Kotak Institutional Equities	52,922	7,050	11,575
JM Financial Institutional Securities Pvt Ltd	52,458	6,840	11,076
Prabhudas Lilladher Pvt Ltd	53,337	6,816	11,201
Systematix Shares and Stocks (India) Ltd	53,304	6,722	11,638
Average	53,325	7,215	11,683

 

End

 

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Edited by Saji George Titus

 

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