Tata Consumer Shares Decline Despite Robust Topline Growth And Margin Boost; What Analysts Say!

The shares of Tata Consumer Products Ltd (TCPL) declined in early trade on Thursday (February 8) despite impressive topline growth, strengthened margins, and strategic market expansion.

The fast-moving consumer goods (FMCG) major has reported a topline that surpassed estimates across all three key segments, reflecting the company's resilience in a dynamic market environment. Although the net profit saw a decline of 17.3% year-on-year, TCPL's overall performance has been commendable.

Global brokerage firm Morgan Stanley has upheld its 'Overweight' rating on Tata Consumer, setting a target price of Rs 1,305 per share. The firm cited TCPL's outperformance in topline figures across its diverse segments as a key factor behind its positive outlook.

TCPL's earnings before interest, taxes, depreciation, and amortization (EBITDA) rose by 26% year-on-year, while the overall revenue witnessed a 10% increase, aligning with market estimates. The robust improvement in margins can be attributed to the stellar performance of the India-branded food and beverage business, where the share grew from 13% to 17% in the third quarter of the last financial year.

In the domestic market, TCPL's India beverages business showed a growth of 8% year-on-year, driven by a 2% increase in tea volumes. The India foods segment recorded a substantial 13% year-on-year growth with a 5% increase in volume. Despite a marginal dip in market share in salt, the product achieved its highest-ever monthly market share in December. However, TCPL experienced a decline in market share for tea, with a 20 basis points volume dip and a 70 basis points value dip.

The company's foray into e-commerce has been noteworthy, with online sales now constituting 10.7% of the Indian business. TCPL continues to lead in tea sales in the e-commerce channel, maintaining its market leadership position.

NourishCo, a subsidiary of TCPL, exhibited an impressive 34% year-on-year growth. Brands such as Himalayan, Tata Gluco+, and Tata Copper+ sustained robust growth trends. The Tata Sampann portfolio recorded a stellar 40% growth for the quarter, driven by strong volume expansion. TCPL's strategic focus on premiumization is evident, with premium and sub-premium brands outpacing popular and economy brands in terms of growth.

Tata Consumer's joint venture with Starbucks has further solidified its presence, boasting 392 stores across 55 cities. Notably, the company has added 59 net new stores in the current fiscal year, contributing to the joint venture's success.

The international business segment witnessed an 11% year-on-year growth (6% in constant currency terms) with a remarkable EBIT growth of 23%. In the UK, teapigs and Good Earth continued to register robust growth, while in the USA, Good Earth and Teapigs outpaced category growth rates.

Despite the positive operational performance, the shares of Tata Consumer Products Limited experienced a decline of more than 2%, trading at Rs 1,138 per share as of 11:50 am on the National Stock Exchange (NSE). However, it is essential to note that the stock has exhibited substantial gains of nearly 61% over the last one year, highlighting investor confidence in the company's long-term prospects.

With a strong focus on premiumization, strategic expansion in diverse markets, and a robust portfolio, TCPL remains well-positioned for sustained success in the competitive FMCG landscape.