Buy This Consumer Products Stock For 24% Return, In Near Term: ICICI Securities

Brokerage firm ICICI Securities have recently recommended buying the stock of Tata Consumer Products for a 24% return in the near term. The firm said, "Post acquiring 100% stake in the international tea business and Tata Coffee, TCPL has created a simplified structure to potentially sell commodity/ low-growth/ low-profit businesses."

Target Price

The Current Market Price (CMP) of Tata Consumer Products (TCPL) is Rs. 743. ICICI Securities has estimated a Target Price for the stock at Rs. 925. The stock is expected to offer a 24% upside, in 1 year.

Stock Outlook
Current Market Price (CMP)	Rs. 743
Target Price	Rs. 925
1 year return	24.49%

Company performance

The company's revenue in FY 21 was recorded at Rs. 1,16,020m, which is expected to be at Rs. 1,27,165m in FY 22. Their EBITDA in FY 21 stood at 46.2m, which is expected to be at 39.1m in FY 22. The company's adjusted net profits in FY 21 were recorded at Rs. 8,654m, which is expected to be at Rs. 10,018m in FY 22. Minority interest was Rs. 957mn (9.3% of pre-minority PAT) in FY21. The firm said, "With the acquisition of a minority stake in two major subsidiaries, we believe the minority interest will be close to nil. However, it needs to issue 7.5mn shares and 23.8mn shares to acquire Tata Consumer Products UK Group Ltd and Tata Coffee. Additionally, TCPL's number of shares will increase to 953mn from 922mn now. Overall, there will be earnings accretion of 5-10%."

Comments by ICICI Securities

Maintaining a buy rating, ICICI Securities commented, "TCPL is in the process to create a simplified corporate structure which may allow it to unlock/sell some of its low-growth / low-profit subsidiaries. That is the key insight we have gained from TCPL's restructuring plan. We also believe recurring earnings accretion of 5-10% is a high probability post the restructuring as minority interest of Rs. 957mn (9.3% of pre-minority interest) will be almost nil, there will be a reduction in admin and legal expenses, likely some savings from the release of excess management bandwidth and there will be some tax savings and better utilization of tax credits."

About the company

The merger of the consumer products business of Tata Chemicals with Tata Global Beverages Limited (TGBL) led to Tata Consumer Products Ltd, a significant player in the FMCG segment. TCPL has brands like 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. Their brands are present in over 40 countries with a diverse workforce spread across the world.

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Disclaimer

The above stock was picked from the brokerage report of ICICI Securities. 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.