Tata Consumer Products (TCPL) is one of the major FMCG companies present in tea, coffee & other beverages in India, UK, US, Canada & some other geographies. In India, it also has salt, pulses, spices & other foods products. Its subsidiary NourishCo is present in packaged water & other beverages. The company is in a JV with Starbucks, which has 275 stores in India.
TCPL posted solid results with 10.6% sales growth on high base.
TCPL’s share price has moved up 4.7x in the last five years (from Rs 164 in August 2017 to 773 in August 2022).
We value the stock at Rs 950 on ascribing 55x FY24 earnings multiple
We also like Dabur in our FMCG coverage.
|Key Financials||FY20||FY21||FY22||5 Year CAGR % (FY17 - FY22)||FY23E||FY24E||(Blank)||CAGR % (FY22-24E)|
|EBITDA Margin %||13.4||13.3||13.8||-||14.6||15.4||-||-|
|Adjusted Net Profit||641.8||932.6||1,015.2||17.4||1,335.8||1,600.5||-||25.6|
Q1FY23 Results: Foray in newer category & innovations to drive revenues
Tata Consumer continues to report a strong set of numbers driven by price hikes in India food & international businesses. Further, benign tea prices continue to result in gross margins expansion, which gives TCPL leeway to increase its ad-spend behind new brands & categories. The newer products like Tata Sampann, Tata Soulful, Tata Q, NourishCo brands & new launches under Himalayan brand saw YoY growth of 53% during the quarter. We believe newer products would drive the volume growth for the company in the longer run. Moreover, leveraging existing brands for extensions in high opportunity size categories & premiumisation play in saturated categories like Salt & Tea would result in margin improvement going forwards. We believe expansion of Starbucks stores would also aid profitability in future. We remain positive on Tata Consumer on growth outlook & margin expansion possibility. We maintain our BUY recommendation on the stock with a revised target price of Rs 950/share (earlier Rs 910/share).
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