Nestlé India Stock Dips as BofA Downgrades Outlook Amid Margin Concerns
Nestlé India shares dropped nearly 4% on Tuesday, approaching a 52-week low, after Bank of America (BofA) downgraded the FMCG giant from “Neutral” to “Underperform.” The downgrade, driven by concerns over weakening margin growth and stretched valuations, triggered negative investor sentiment across the domestic market.
BofA cited a slowing outlook on margin expansion as a key factor behind the downgrade. The global brokerage firm noted that Nestlé India’s current valuations—hovering around 52 times FY26 estimated earnings—are not sustainable in the absence of strong near-term margin drivers. Nestlé India’s 12-month forward PE ratio remains significantly above its 10-year average, reinforcing investor concerns about premium pricing amid subdued earnings momentum.
BofA also indicated limited upside for the stock, setting a target price of ₹2,500, suggesting a potential downside of over 10% from current levels. On Tuesday, shares of Nestlé India traded at ₹2,788 in intraday deals on the BSE, nearing its 52-week low of ₹2,696.70.
“From the current level, Nestlé offers just 5% EPS CAGR over FY24-26E. With limited expansion in gross margins and operating leverage tapering off, we see earnings normalization over the next two years,” said BofA in a note to clients.
In terms of volume growth, the report noted steady performance. However, margin levers—such as softening raw material costs—may have been fully realized, which could limit future profitability gains. The commentary raises strategic questions for Nestlé India as it navigates input cost fluctuations and consumer behavior dynamics in the premium food and beverage category.
The development underscores broader valuation concerns across the FMCG sector, where established players face pressure to justify high multiples in an environment of moderated growth. For brand owners and investors, the shift highlights the importance of innovation and cost management to sustain earnings and maintain investor confidence.
Nestlé India has not issued an official statement in response to the downgrade.