Nestle India share price extends slide to 3rd day as BofA's downgrade weighs; Do you own?

Nestle India share price declined for the third consecutive day on Thursday after global brokerage firm BofA Securities downgraded the stock and cut the target price by 7.5 per cent.

At 9:30 am, Nestle India shares were down 0.5 per cent to trade at ₹2,200.80 apiece on NSE.

Nestle India shares downgraded to ‘neutral’

The brokerage has downgraded the stock from a "neutral" rating to "underperform" and lowered its price target from ₹2,315 to ₹2,140 per share. This adjustment suggests a potential decline of 4.2% from the last closing price of ₹2,234.

In its note, BofA Securities highlighted that sluggish demand, rising costs, and intensified competition create a tough operating environment, which is likely to impact Nestlé India in the near term.

The report stated that pricing could continue to be a key growth driver despite significant inflation in commodities like coffee and cocoa, which affect 30% of the company's portfolio.

The brokerage anticipates some volume recovery from a low base but expects overall growth to remain moderate.

"With a rapidly changing consumer landscape and competitive dynamics, the company will have to tightly balance growth and margin mid-term; we think operating margin is capped and can move a tad lower," the BofA Securities note said.

The brokerage also noted that Nestlé India's valuation appears high relative to its growth prospects and industry peers.

BofA Securities has lowered Nestlé India's earnings estimates by 3% to 5% to account for recent trends and rising costs.

The global brokerage firm has also downgraded another FMCG stock Hindustan Unilever (HUL) to ‘neutral’. BofA stated that while HUL's trends may improve from recent lows, the pace of growth and margin recovery appears much slower than initially expected. It also highlighted that overall consumption remains subdued, with urban India experiencing a slowdown and rural recovery progressing gradually.

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