Buy This Tata Group FMCG Stock For A Target Price of Rs. 960 & 605% Dividend

Tata Consumer Products Ltd is a large-cap company in the FMCG industry with a market capitalization of Rs 71 crore. For the fiscal year 2021-22, the Board has proposed a final dividend of Rs. 6.05/- per equity share of Re. 1 each (605 per cent). If approved by members at the subsequent Annual General Meeting ("AGM") on Monday, June 27, 2022, the dividend will be paid after the AGM and within 30 days of its announcement. Following Tata Consumer Products Limited's (TCPL) Q4FY2022 results, brokerage company Sharekhan has given the stock a buy recommendation with a target price of Rs. 960.

Q4FY2022 performance

The brokerage has said "Tata Consumer Products Limited's (TCPL's) Q4FY2022 performance was boosted by a strong rise in margins, led by a correction in input prices (raw tea). Consolidated revenue grew by ~5% to Rs. 3,175.4 crore. India beverage business' revenues stood flat (3% volume growth) due to price cuts in the tea portfolio to pass on the benefits of correction in the raw tea prices. The foods business registered 19% growth (sales volume stood flat), driven by a 30% rise in volumes of Tata Sampann brand. Salt revenues grew by 15% y-o-y. Domestic raw tea prices were down by 10% y-o-y and 18% q-o-q, which resulted in a 539 bps y-o-y improvement in gross margins to 44.6% and a 411 bps improvement in OPM to 14%. During the quarter, TCPL board proposed reorganisation of its India and overseas business to simplify, align and synergise the business, which will lead to PAT accretion of 5-10% in the next 12-18 months."

Buy for a target price of Rs. 960

Sharekhan has claimed that "With strategies in place, TCPL is well poised to achieve double-digit revenue and PAT CAGR of 15% and 20%, respectively, over FY2022-FY2024. The proposed scheme of arrangement will not only be earnings accretive for TCPL but will enable better leverage in supply chain, increased focus under different business verticals with specialised management team, and accelerate decision making in the coming years. The stock is currently trading at 56.2x/46.1x its FY2023E/FY2024E earnings. With strong growth prospects, relative stable commodity prices and sturdy cash flows (FCF/EBITDA of 100%), we maintain TCPL as one of the top picks in the FMCG space. We maintain a Buy recommendation on the stock with an unchanged price target (PT) of Rs. 960."

Any slowdown in demand in the domestic or international market or increase in key commodity prices would act as a risk to our earnings estimates in the near term, said the brokerage.

Disclaimer

The stock has been picked from the brokerage report of Sharekhan. 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.