Nestlé India Q1 Profit Drops 12% Despite 6% Sales Growth: Should You Buy or Wait?
- 24th July 2025
- 01:15:00 PM
- 4 min read
Mumbai | July 24 – Volume is back. Margins are not.
Nestlé India’s June quarter numbers tell a story familiar to FMCG watchers but critical for investors: a 6% revenue bump to ₹5,100 crore, driven by solid volume recovery across Maggi, Nescafé, and KitKat, even as profitability was dragged down by high input costs and expansion-linked expenses.
Net profit fell 12% year-on-year to ₹660 crore, missing estimates as gross margins shrank 249 basis points to 55.2%. Elevated commodity prices and a sharp increase in operating expenses (linked to new manufacturing lines) hurt operating leverage, while higher finance costs added pressure as the company borrowed to manage operational cash flows. EBITDA slipped 1.3% to ₹1,100 crore, with margins narrowing to 21.6% from 23.2% last year, underscoring that volume gains alone aren’t enough when inflation bites.
What’s working for Nestlé India?
India’s top packaged food maker has leaned on its core brands to drive volume-led recovery. The Maggi portfolio delivered double-digit growth, supported by Quick Commerce and RUrban channel expansion, with new launches like Double Masala Classic and Spicy Range gaining traction among consumers seeking variety.
In beverages, Nescafé clocked another quarter of strong double-digit growth, balancing premiumisation (Gold, Roastery) while protecting its mass-market play with affordable packs to defend market share. The Confectionery segment remained a bright spot, with KitKat, Munch, and Milkybar driving high double-digit growth across urban and semi-urban markets. Even exports, often a quiet contributor for the FMCG major, grew 16% with increased demand for foods, coffee, and cereals, including the UK launch of Masala-Ae-Magic.
Nestlé’s multi-channel distribution strength was evident, with e-commerce now contributing 12.5% of domestic sales and the Out-of-Home segment emerging as the fastest-growing vertical as institutional and on-the-go consumption trends recover.
Why this matters for investors
Nestlé India is one of the most consistent compounders in the FMCG sector, with its premium valuation reflecting stable demand across economic cycles and categories. In a market where many FMCG players have highlighted rural demand weakness, Nestlé’s volume gains suggest underlying brand pull, effective distribution, and innovation-led consumption support even in a high inflation environment.
Yet, margin pressures are being closely watched by investors, as raw material costs across milk, cocoa, and edible oils had remained elevated until recently. Nestlé’s significant investments in manufacturing capacity, while positive for future scalability, have added near-term operating costs, weighing on EBITDA margins.
What next for Nestlé India’s margins?
Management expects milk prices to ease with the monsoon, while cocoa and edible oil prices have stabilised, and coffee prices are likely to remain range-bound. This sets the stage for possible margin recovery in the coming quarters, though the pace will depend on consistent demand trends and the company’s ability to navigate competitive pricing pressures in noodles, coffee, and confectionery segments.
Leadership continuity is also in place, with Manish Tiwary set to take over as Chairman and MD from August 1. “We have delivered balanced growth in three of our four product groups, led by volume recovery across categories. With stabilising commodity prices, we anticipate margin pressures to ease in the coming quarters,” said Suresh Narayanan, Chairman and MD, Nestlé India.
Nestlé India Q1FY26: Key Numbers at a Glance
- Revenue: ₹5,100 crore (+6% YoY)
- Net Profit: ₹660 crore (-12% YoY)
- EBITDA: ₹1,100 crore (-1.3% YoY)
- Gross Margin: 55.2% (-249 bps YoY)
- EBITDA Margin: 21.6% (-160 bps YoY)
PL Capital View: Should you buy, hold, or wait?
Nestlé India’s Q1FY26 performance was in line on revenue but missed profit estimates by ~12% due to lower gross margins, higher operational expenses from capacity expansions, and increased finance costs. However, volume recovery across categories indicates improving consumption trends, even in a challenging environment.
Trading at ~64x FY27E EPS, Nestlé India remains a premium FMCG compounder, supported by its deep distribution, brand equity, and product innovation pipeline. With raw material prices stabilising and expanded capacities expected to add leverage, margins should gradually recover post-Q1FY26.
For long-term investors, we maintain an ‘Accumulate’ stance, suggesting a hold or gradual addition on dips for those seeking stable compounding within India’s consumption growth story. Short-term volatility may persist as margin recovery takes shape, but Nestlé’s fundamentals remain intact for patient investors.
PL Capital
Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.
