Buy This Tata Group Stock For 21% Upside, Says Motilal Oswal

Broking firm, Motilal Oswal is bullish on the stock of Tata Consumer Products and has recommended a buy on the stock for good gains of 21%.

Reorganization to benefit company

Tata Consumer Products Ltd (TCPL) announced reorganization of India and overseas business to simplify the corporate structure, align and synergize its business. The company came out with two announcements focusing on creating a single consumer product entity by consolidating the branded coffee business of TCL (excluding the coffee plantation segment) with TCPL and also buying out the minority stake in the TCP UK business.

"The merger will result in focused management attention, operational efficiencies, revenue and cost synergies including from commonality of customers, sales and supply chain opportunities through enhanced geographical reach, optimization of capital, operational (including promotion) expenditure, leveraging sales and distribution network and simplification of overlapping infrastructure," the brokerage has said.

Combined entity to offer good reach and solid brands

According to Motilal Oswal, the combined entity will house the entire bouquet of strong consumer brands such as Tata Tea, Tetley, Eight O'clock, Tata Coffee, Tata Salt and Tata Sampann among others creating an operational synergy in terms of common customers and sales & supply chain opportunities through enhanced geographical reach.

"As per management; with the consolidation of ownership interests in the international branded business, cost benefits, higher operating and other efficiencies is expected to kick in generating an incremental EPS of 5-10% going forward," Motilal Oswal has said in its report.

"We expect a sales/EBITDA/PAT CAGR of 9%/17%/23% over FY21-24E, respectively. Factoring the increase in outstanding share by 3.4% in FY24 due to restructuring and minority income adjustment; we increase our EPS estimate by 3%. We maintain Buy rating on the stock with SOTP based target price of Rs 900," the brokerage has said.

Disclaimer

The stock is taken from the report of Motilal Oswal. Investors and readers should not construe the above report as investment advice and due to their own due diligence before taking any risky calls.