Rs 20 to Rs 850: 4150% return in 20 years! What's next for Tata Consumer stock?

Shares of Tata Consumer Products have delivered multibagger return to its long-term shareholders in the last 20 years as the stock has zoomed over 4150 per cent during the same period. The stock is in focus again after the company posted its earnings for the first quarter ended June 2023.

The company's net profit for the quarter came in at Rs 338 crores, up 22 per cent on an year-on-year basis. Revenue from Operations for the quarter increased 12 per cent to Rs 3471 crores. For the quarter, the India Packaged Beverages business delivered 2 per cent revenue growth and 3 per cent volume growth and the India Foods business delivered 24 per cent revenue growth and 6 per cent volume growth.

The international business revenue grew 7 per cent. The company said that all three brands in the UK- Tetley, Good Earth, and tea pigs gained value market share during the quarter.

About Tata Consumer Products Limited

Tata Consumer Products Limited is one of the leading food and beverage companies in India. The company’s portfolio of products includes tea, coffee, water, RTD, salt, pulses, spices, ready-to-cook and ready-to-eat offerings, breakfast cereals, snacks and mini meals.

Tata Consumer Products is the 2nd largest branded tea company in the world. Its key beverage brands include Tata Tea, Tetley, Eight O’Clock Coffee, Tata Coffee Grand, Himalayan Natural Mineral Water, Tata Copper+ and Tata Gluco+. Its foods portfolio includes brands such as Tata Salt, Tata Sampann and Tata Soulfull.

Where is the stock headed?

According to ICICI Securities, the company’s initiative of split routes in towns with 1 million population has shown healthy results. The growth businesses reported 58 per cent revenue growth and the company has stepped up the innovation in growth business and improvement in profitability of India Foods and well as International Beverages indicates additional resources to drive growth.

It believes the market share loss of 110bps and 30bps in India Tea and India Salt to be temporary as North India was impacted. "With multiple initiatives in distribution, extension of regionalisation strategy in Jharkhand and Odisha and strong investments in innovation, we model market share recovery in FY24-25," it said.

The brokerage firm has maintained a 'Buy' rating on the Tata Group stock with a revised target price of Rs 1,010, suggesting an upside potential of over 19 per cent from Thursday's closing level of Rs 850.25.

Prabhudas Lilladher expects NourishCo, Tata Soulfull and Tata Sampann to grow in high double digits and increase their share in sales from current 15% in coming years. It believes steady growth in core Tea business and sustained traction in high growth segments will enable the company to report strong growth in coming years.

JM Financial said that the international growth rates were disappointing with US Coffee sales down another 5 per cent in CC terms as volumes fell 12 per cent and the International Tea piece declined 4 per cent like-to-like in CC terms with volumes lower by 11 per cent here as well.

It added that the progression on international margin was, however, quite encouraging and salt profitability is also back in the normative range. Valuations have run up quite significantly over the last three months (stock is currently trading at a slight premium to HUL) which leaves very little room for error, in our view, it said.

The brokerage firm has maintained a 'Buy' rating on the stock with a target price of Rs 900 per share.

Nuvama Institutional Equities also has a 'Buy' rating with the target price of Rs 925. “Overall, the worst seems to be behind for the India tea business and international margins, and FY24 is likely to be better with Q1FY24 showing some decent improvement,” it said.

According to Morgan Stanley, the strong growth trends in salt and Sampann business are positives for Tata Consumer. However, the company losing its market share in the tea business is a negative element. It has an 'Overweight' rating on the stock with the target price of Rs 863.

Tata Consumer Products: Current Share Price

The Tata Group stock ended 2.73 per cent lower at Rs 850.25 on BSE on July 27, 2023. Market cap of the firm fell to Rs 78,989.22 crore.

Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of Business Today. Investors should consult their financial advisors before taking any position.

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