Buy This Tata Group Stock for 24% Gains, Says Motilal Oswal

Based on the estimates of Motilal Oswal research, Tata Consumer stock will surge to Rs 900 per share from Rs 726 per share, will potentially grow by 24%. A part of conglomerate, Tata Group, this FMCG company, Tata Consumer's quarterly numbers were in line of operating performance as per the research coverage.

Tata Consumer's standalone business scaled up

According to the Motilal Oswal's coverage report, despite the growth in earnings before interest and taxes (EBIT) grew by 14%, the quarter performance was dragged down by international business. "Tata Consumer Products reported a muted operating performance in 3QFY23 despite 14% YoY EBIT growth in the standalone business. The quarter performance was mainly dragged down by a 39% YoY decline in EBIT of the international branded business due to inflationary pressures, currency weakness and a lag in pricing. The company posted revenue of Rs 34.7 billion (estimated. Rs 34.3 billion), up 8% YoY. Earnings, before, interest, tax, depreciation and amortisation (EBITDA) margin stood at 13.1% (estimated 13.4%), affected by a lower gross margin of 41.5% (v/s 43.7% in 3QFY22). EBITDA declined 2% YoY to Rs 4.5 billion (estimated Rs 4.6 billion). Adjusted profit after tax (PAT) was down 6.5% YoY at Rs 2.9 billion (v/s estimated Rs 2.8 billion). For the Indian branded/international businesses, revenue grew 8%/4% YoY to Rs 21.7 billion /Rs 9.3 billion, and EBIT was up 14%/down 39% YoY at Rs 3 billion / Rs 884 million."

Growth forecast of Tata Consumer Products: Buy stock, with a price target of Rs 900 per share.

Motilal Oswal report has given, insights about what the MD and CEO, Sunil D'Souza's views are in terms of Tata Consumer's growth. "Demand sluggishness, currency weakness & inflation impacted international margin, expect international margin to improve QoQ. Expect domestic tea volumes to bottom out in Q4 and target ₹1,000 crore revenue in Nourishco in FY24. Open to all acquisitions that will take co into newer categories and so expect to continue double-digit growth in revenue with 15% margin in FY2."

Motilal Oswal believes that the company is focused on its new line of products that will be growth drivers for the company. "Tata Consumer is focused on new growth engines such as Tata Sampann, NourishCo, Tata Soulfull, and the ready-to-eat/ready-to-consume business (Tata Smartfooz), which will drive the next leg of growth. We expect a revenue / EBITDA/ PAT compound annual growth rate (CAGR) of 9%/16%/26% over FY23-25. Factoring in an in-line performance in 3QFY23, we maintain our FY23/FY24/FY25 earnings estimates and maintain our BUY rating on the stock with an SoTP -based TP of Rs 900."

The current market price of Tata Consumer stock is Rs 730.35 per share and its market capitalisation is Rs 67,841.08 crore. The stock price per share declined by 7.32% in last six months, its 52-week high is at Rs 861.35 per share and 52- week low is at Rs 650.75.

Disclaimer

The stock has been picked from the brokerage report of Motilal Oswal, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to consult with certified experts before making any investment decision.