10:1 Split, Rs 7.75/Sh Dividend: Tata's FMCG Stock To BUY, 18% Potential Upside Seen; MS, Nirmal Bang

Tata Group-backed FMCG company, Tata Consumer Products is an attractive bet to fetch double-digit gains ahead. Both Nirmal Bang and global brokerage Morgan Stanley are the latest to give a positive outlook on the stock. Tata Consumer has recently paid a final dividend of Rs 7.75 per share for FY24.

Currently, the stock is at Rs 1114.40 apiece, down by 0.96% on June 13 with a market cap of Rs 1,06,183.91 crore on BSE. The stock's 52-week high and low is at Rs 1,269.60 apiece and Rs 816.40 apiece respectively. YTD, the stock is up with single-digit gains of 3.20%.

Morgan Stanley has maintained an overweight on Tata Consumer stock with a target price of Rs 1,288 per share. The outlook is positive.

According to Stanley, Tata Consumer's tea and stall business is likely to target up to 5% growth in volume terms and 7-8% growth in value terms in the medium term. While EBITDA margins are expected to expand by 75-125 bps year-on-year ahead. Also, the brokerage expects the company's nourishco, Sampann, soulful, capital foods, and organic India business to log growth of 30%.

Furthermore, the highest target in Tata Consumer is currently set by Nirmal Bang at Rs 1,310 per share, hinting at a nearly 18% potential upside in the stock ahead of the current price level.

In its note, Nirmal Bang said, "We have not made any changes to our FY25E/FY26E EPS estimates after the meeting. We remain positive about TATACONS over the medium to long term on the back of (1) Improvement in margins and gradual recovery in volume growth in the core India Foods business as well as India Beverages business (2) Premiumisation initiatives (particularly in Salt) and (3) Robust growth in new businesses."

Also, Nirmal Bang added, "The stock is trading at ~48x FY26E EPS. While the valuation is not cheap, we believe that the company offers a wider play than peers like NEST and BRIT on the formalization of the US$40bn Packaged Foods market in India. Earnings growth over the next two years is likely to be strong at ~29% CAGR. We have a BUY on TATACONS with a TP of Rs1,310, valuing it at 55x on FY26E EPS."

Tata Consumer Products is home to 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.

As per Trendlyne data, Tata Consumer has delivered up to 25 dividends since August 2001. In FY24, the dividend payout was Rs 7.75 per share, which is slightly lower than the reward of Rs 8.45 per share in FY23.

Meanwhile, Tata Consumer stock has also turned ex-split once in the ratio of 10:1. In June 2010, the face value of Rs 10 each on one equity share of Tata Consumer split into ten equity shares with face value of Rs 1 each.