Nestle and HUL Shares Fall After BofA Downgrades: Here’s What Triggered the Move

Shares of Nestle India and Hindustan Unilever (HUL) slipped on April 2 following downgrades by Bank of America (BofA) Securities. Nestle stock dropped over 2%, while HUL declined by around 1.4% on the day.

BofA Downgrades Nestle India to ‘Underperform’

BofA downgraded Nestle India from ‘Neutral’ to ‘Underperform’ and revised its target price to ₹2,140 per share, indicating a downside of over 4% from the previous close of ₹2,234.

Key factors behind the downgrade:

Soft demand trends and increasing cost pressures

Intense competition from new and existing players

Commodity inflation in coffee and cocoa impacting 30% of Nestle’s product portfolio

Elevated stock valuation relative to its peers and growth outlook

BofA expects some volume recovery on a low base but noted that the overall growth trajectory remains modest. As a result, it has cut earnings estimates by 3-5%.

HUL Downgraded to ‘Neutral’; Target Price Reduced

BofA also downgraded Hindustan Unilever from ‘Buy’ to ‘Neutral’, reducing its target price to ₹2,330 from ₹2,540. Despite the downgrade, this target suggests a potential upside of over 4% from HUL’s last closing price of ₹2,233.85.

Key insights from the downgrade:

Urban demand remains soft, while rural recovery is gradual

About 35% of HUL's portfolio faces pressure from inflation or sector-specific challenges (tea, soaps, nutrition)

Growth and margin recovery are progressing slower than expected

The company’s investments in high-growth segments are promising but may not drive near-term performance

Earnings forecasts for HUL were also revised downward, with Q4FY25 estimates cut by 2%, and FY26–27 projections trimmed by 4–5%.

Stock Performance and Outlook

Nestle India: Down 18% over the past six months

HUL: Dropped 23% in the same period

Despite near-term headwinds, BofA remains optimistic about the long-term potential of India’s consumer market but highlighted that large FMCG players are currently seeing growth levels at a two-decade low.

“The upcoming quarters will be crucial in determining the direction of valuations,” BofA stated.

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