Nestle India (NESTLEIND)

FairStock Score: 65/100 — STEADY

Score breakdown: P/E: 0/3 · ROCE: 2/2 · Growth: 2/2 · Dividend: 0/1

Key Financials

Strengths

• Exceptional profitability: ROE of 73.53% and ROCE of 95.66% reflect a powerful brand and capital-light model.
• Minimal leverage with debt/equity of just 0.09 provides financial resilience.
• Strong free cash flow of ₹4,424 crore supports reinvestment and dividends.
• High promoter holding of 62.76% aligns management with minority shareholders.
• Consistent mid-single-to-high single digit sales growth of 9.74% shows enduring consumer demand.

Concerns

• Extreme valuation: P/E of 78.35, P/B of 61.33, and EV/EBITDA of 60.89 leave almost no room for error.
• Negative margin of safety of -1280.83% against Graham Number and DCF value of ₹312.33.
• Profit growth is flat at -0.22% despite sales growth, indicating margin pressure or rising costs.
• Current ratio of 0.67 suggests dependence on short-term liabilities for working capital.

AI Analysis

Let me apply the Graham test first: buy with a margin of safety. At ₹1,410.50, the stock trades at 78.35 times earnings and 61.33 times book, while the Graham Number is only ₹93.55. The DCF intrinsic value is ₹312.33. Against those, the market price offers a negative margin of safety of roughly 1,280%. That alone would stop Benjamin Graham in his tracks. But let's not be foolish; this is a high-quality business. Nestle India earns a ROE of 73.53% and ROCE of 95.66%, with minimal debt; debt-to-equity is just 0.09. Free cash flow is ₹4,424 crore, and promoter holding of 62.76% aligns interests with minority shareholders. The latest quarter shows net profit of ₹1,018 crore on sales of ₹5,667 crore. I admire a business that can compound, and the 9.74% sales growth shows the brands still have traction. Yet profit growth is flat at -0.22%. At a PEG of 125.91, the market is paying a price that assumes perfection for decades. Even a stalwart can become a poor investment if bought at the wrong price. The current ratio of 0.67 also tells me there is working capital reliance, though the low debt gives comfort. As Graham said, price is what you pay and value is what you get. The value here is real, but the price is not. I would place this on my watchlist, not in my portfolio. If the market ever offers Nestle India closer to intrinsic value, then this wonderful business may become a wonderful purchase.

Data from BSE/NSE filings. AI analysis is for educational purposes only — not investment advice. Scoring methodology · Disclaimer