Nestlé India Ltd dished out stellar March quarter (Q4FY26) results with revenue growth, volume growth and Ebitda margin coming in at multi-quarter highs.
Total operating revenue grew 22.6% year-on-year to ₹6,748 crore in Q4. As per Nomura Research, volume plus mix growth was 20.5%, while pricing growth was only about 3%. So, what drove the strong volume growth?
One, distribution expansion helped. Nestlé has reached about 216,000 villages, up from about 208,500 a year earlier, steadily increasing its presence in rural India. Two, the company executed its omni-channel strategy well, scaling up e-commerce and quick commerce with platform-specific product packs.
Third, a step-up in advertising and brand investments, with ad spends growing over 50% year-on-year. Lastly, product innovation across categories – from new Maggi variants to premium coffee and confectionery launches. Thus, Nestlé gained market share in its key segments.
Nestlé’s gross margin continued to decline year-on-year for the sixth consecutive quarter. However, the Ebitda margin rose 103 basis points to 26.3% year-on-year, after falling for six straight quarters.
The moot question for investors now is if the impressive run in Q4 can be sustained. In the near term, distribution expansion, premiumization in coffee and chocolates and wider rural reach can support growth.
“While Nestlé’s growth trajectory is at a multi-year high, growth could decelerate progressively over FY27 as 1) GST-related benefits phase out of the base from Q3, and 2) growth in Maggi and Milks & Nutrition normalizes,” said Systematix Shares and Stocks (India).
Nestlé’s FY26 revenue growth stood at 14.6%, while its Ebitda margin fell 69 bps to 22.9%.
Cost pressures
While the Q4 margin was at a high, investors will closely track operating leverage as growth eases and cost pressures rise, led by the West Asia war. Milk prices have firmed and are expected to stay high through the summer lean season, Nestlé said, adding that coffee prices continue to trend lower and cocoa prices remain subdued.
Unseasonal rains in April have hurt the wheat harvest. Besides, competition from regional brands and potentially slower traction in new product launches can’t be ignored.
Nestlé’s consistent execution, leadership and market share gains support the stock’s premium valuations. The stock trades at 66x estimated FY28 earnings, which is hardly cheap. The key question for investors is whether Nestlé is able to sustain its good show on growth.