Buy This Tata Group Stock, Company's PAT Grew 45% YoY To Rs. 294.5 Cr: Top Brokerage

Brokerage firm, Ashika has recommended investors to buy the stock of Tata Consumer Products Limited (TCPL). The company's adjusted PAT grew by 45% YoY to Rs. 294.5 crore. The management is focused on delivering accelerated growth with a consistent improvement in operating margins in the coming quarters.

Stock To Buy: Target Price

The Current Market Price (CMP) of Tata Consumer Products Limited (TCPL) is Rs. 809. Ashika has estimated a Target Price for the stock at Rs. 935. This stock has the potential to give a 15.57% return, in the upcoming 1 year. It is a large-cap stock with a market capitalization of around Rs. 76,829 crore.

Stock Outlook
Current Market Price (CMP)	Rs. 809
Target Price	Rs. 935
Potential 1 year return	15.57%
52 week high share price	Rs. 889
52 week low share price	Rs. 650.20

Financial Result

TCPL registered strong numbers for Q1FY23 amid challenging demand and a volatile raw material environment. Consolidated revenues grew by 10.6% YoY to Rs. 3,326.8 crore. India business grew by 9% YoY largely led by pricing. India packaged beverage revenues declined by 4% YoY (volume growth of 1%), foods business grew by 19% YoY (volume decline of 3% on high base) while the international business grew by 8% YoY on CC terms, Ashika informs.

India beverage business was affected due to high base YoY and the decline was led by pricing corrections with normalizing tea market share improvement in some key categories and markets. Gross margins improved by 186 bps YoY to 42.6% aided by softening of raw tea prices while EBITDA margins expanded marginally by 47 bps YoY to 13.7%.

Stock Advantages: Ashika

According to Ashika, "The company has expanded its distribution reach and further expects to expand direct distribution reach to 1.5 mn outlets by FY23. The company has also taken steps to restructure the international business while new divisions and businesses will drive growth (Tata Sampann, Tata Soulful, TataQ, NourishCo brands & new launches under Himalayan brand saw YoY growth of 53% during Q1FY23). TCPL has been launching new products in Tata Sampann and leveraging existing brands for extensions in high opportunity size categories. TCPL expects to grow at a low-to-mid-single digit level in the international business, while in the domestic business, it is targeting a double-digit growth. At the CMP, the scrip trades at P/E of 48.8x FY24E EPS and investors are advised to Buy for a target of Rs. 935."

International business

TCPL has been undertaking reorganization strategies for the international business which primarily constitutes of US Coffee and International Tea businesses. The company's major brands are Tetley, teapigs, Tata Tea, Good Earth, and Eight O'Clock and which are offered in three key international markets - USA, UK and Canada. The international business registered a 5% revenue decline in FY22 (1% like-for-like growth, net of exits in the international Food Service business; but down 2% in constant currency terms (CC), the brokerage firm informs.

Company Portfolio:

Tata Consumer Products Limited (TCPL) is a consumer-focused products company formed by the merger of the consumer products business of Tata Chemicals with Tata Global Beverages. TCPL is home to some of the marquee and well-loved brands - Tata Tea, Tetley, Tata Salt, Eight O'Clock Coffee, Himalayan Water and emerging brands like Tata Sampann, Tata Soulfull, Tata Gluco Plus and Tata Water Plus. TCPL is the 2nd largest branded tea company in the world. The company also has presence in ~40 countries with US, UK and Canada being integral international geographies for the business operations.

TCPL's brand

TCPL's beverages portfolio comprises of tea, coffee, water and ready-to-drink (RTD) beverages, whereas its foods portfolio encompasses salt, pulses, spices, ready-to-cook mixes, breakfast, snacks and mini meals. Out-of-home retail comprises premium cafes in partnership with Starbucks in India. As of revenue, within branded business, India Business accounted for 70% of revenues and 68% of EBIT while international business accounted for 30% of revenues and 32% of EBIT in FY22.

Disclaimer

The above stock was picked from the brokerage report of Ashika. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.