On Friday, Investec issued a revised price target for Nestle India Ltd (NEST:IN) shares, lowering it to INR2,425.00 from the previous INR2,649.00, while keeping a Hold rating on the stock. The adjustment follows Nestle India's report of a disappointing quarter in terms of revenue growth and an unusual decline in volume. The company's performance has been notably impacted by weak consumer demand, which is particularly concerning given that Nestle's market is predominantly urban.
The analyst from Investec pointed out that Nestle India is facing challenges due to an elevated raw material (RM) basket, which complicates the company's pricing strategy. The inability to increase prices without further diminishing consumer demand has been highlighted as a key issue. In response to these factors, Investec has reduced its growth estimates for Nestle India by 5-10%.
The report further states that despite the current difficulties, there is confidence in Nestle India's long-term growth potential. However, the valuation remains expensive, and the growth outlook uncertain, prompting Investec to reduce the price-to-earnings (PE) multiple from 64x to 60x. This change reflects the firm's cautious stance on the stock's near-term prospects in light of the recent performance and market challenges.
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