Buy This Tata Group Stock For Potential 20% Gain In Short Term, Suggests Sharekhan

Leading brokerage firm Sharekhan is bullish on Tata Consumer Products Ltd for double digit return in short term. If you buy the stock now, you can fetch a potential return of up to 19.97% with target price of Rs 925 apiece. Tata Consumer Products Limited (TCPL) delivered price-led revenue growth of ~11% y-o-y as volumes remained muted across categories and regions. OPM declined by 73 bps y-o-y to 12.9% owing to higher input prices, adjusted PAT declined by 5% y-o-y to Rs. 264 crore.

1. Tata Consumer Products Ltd Stock Outlook

The stock gained 1.28% during Diwali Muhurat Trading 2022 to end at 771 apiece. The stock's 52-week high is Rs 861 apiece and 52-week low is Rs 650 apiece, respectively.

2. Tata Consumer Products Ltd Key Positives/Key Negatives

Key Positives: India foods business registered 29% y-o-y revenue growth despite a high base of 23% growth in Q2FY2022. NourishCo delivered broad-based revenue growth of 64% y-o-y. TCPL opened 25 new Starbucks stores during Q2 taking store count to 300 across three cities. The company has maintained strong cash position of over Rs. 2,000 crore.

Key Negatives: India packaged beverages business declined by 7% y-o-y. Gross margin/OPM declined by 101/73 bps y-o-y impacted by higher raw & packing material prices.

3. Tata Consumer Products Financial Outlook

Tata Consumer Products Limited's (TCPL's) consolidated revenues grew by 10.9% y-o-y (three-year CAGR of ~13%) to Rs. 3,363.1 crore. India beverage revenues declined by 2% y-o-y (volume decline of 1%), the foods business grew by 29% y-o-y (flat volume growth), while the international business grew by 6% y-o-y on CC terms.

The company continued to gain volume share in some key categories and markets. Gross margins were down by 101 bps y-o-y and OPM declined by 73 bps y-o-y affected by higher input prices. Adjusted PAT fell by 5% y-o-y to Rs. 264 crore. For H1FY2023, revenue grew by 10.7% y-o-y to Rs. 6,689.9 crore, while adjusted PAT grew by 7.1% y-o-y to Rs. 558.3 crore and OPM slightly improved by 13 bps y-o-y to 13.3%.

4. Tata Consumer Products Valuation

According to Sharekhan, "Buy with a revised PT of Rs. 925: TCPL delivered mixed performance in Q2FY2023 with revenues growing by 11% y-o-y while adjusted PAT declined by 5% y-o-y. The company is focusing on market share gains, product launches, network expansion and cost restructuring to aid growth in the coming years to improve earnings growth over the next two to three years. Thus, with strategies in place, TCPL is well poised to achieve double-digit revenue and PAT CAGR of 13% and 18%, respectively, over FY2022-FY2024. The stock trades at 59.5x/48.0x its FY2023E/FY2024E earnings. With strong growth prospects, relatively stable commodity prices and sturdy cash flows (FCF/EBIDTA of 100%), we maintain TCPL as one of our top picks in the FMCG space. We maintain a Buy recommendation on the stock with a revised price target (PT) of Rs. 925."

About The Company

Tata Consumer Products Limited is a focused consumer products company uniting the principal food and beverage interests of the Tata Group under one umbrella. The Company's portfolio of products includes tea, coffee, water, 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 Water Plus and Tata Gluco Plus. Its foods portfolio includes brands such as Tata Salt, Tata Sampann, Tata Soulfull and Tata Q. In India, Tata Consumer Products has a reach of over 200 million households.

Disclaimer

The stock has been picked from the brokerage report of Sharekhan. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before taking any investment decision.