Buy This Tata Group Stock For Robust 33% Gains, Registered 52% Growth In New Businesses: Sharekhan

CMP, Target Price, Performance, Returns, 52 Week High & Low

The share of the company today closed at Rs 724.95, the Current Market Price, after a falling nearly 2% on NSE. The current market price of the company is roughly Rs 74.75 above the 52-week low of Rs 650.20 per share level. While it's around Rs164.05 below its 52-week peak of Rs 889 per share level.

Over the last 1 year, the stock witnessed a fall of nearly 1.85%. It also didn't perform well whole, however, it gave positive returns on long-term investment of 192.35% in 3 years and 356.54% in 5 years. It indicates that the stock bagged massive returns in 3 and more than 5 years of investment.

According to the estimated target price of Rs 960 and the CMP, the shares of the company has robust potential to gain nearly 33% in near future.

Tata Consumer Products Limited posted stable operating performance in FY2022 in the backdrop of pandemic uncertainties, commodity price inflation, and slowdown in rural India. Revenue and operating profit grew by 9% and 11%, respectively, with OPM expanding by 53 bps y-o-y to 13.8%.

Attain success in transformation journey

Tata Consumer Products Limited achieved significant success in its transformation journey as the company expanded its reach (added over 8,000 rural/semi-urban distributors), recorded market share gains in core businesses (100 bps and 400 bps in tea and salt), accelerated growth businesses (52% y-o-y growth), continued the innovation momentum (innovation contribution to sales grew by 2x), and expanded into new categories [entered the dry fruits category through Tata Sampann and ready-to-eat (RTE) category through Tata Q]. On the international front, the company gained market share in the fruit and herbal (F&H) category, maintained its market share in Canada, and continued to gain good traction for K-cups category in the retail category of the US.

New businesses scaling up well; Tata Starbucks also performed well

In FY2022, new businesses registered overall growth of 52% because of strong expansion in brand distribution and higher media investments. Tata Sampann brand registered 28% volume growth with broad-based growth across pulses, spices, and other staples (newly launched Poha registered 100%+ growth). In the ready-to-drink (RTD) space, NourishCo registered 83% growth, led by 80% expansion in distribution and strong offtake across brands. Tata Soufull distribution expansion expanded by 10x over 3,00,000 outlets, while there was substantial scale-up in the D2C business by 12x. Domestic branded coffee business registered 45% volume growth with strong traction to brands such as Tata Coffee Gold, Tata Coffee Sonnets, and Tata Coffee Quick Filter. Tata Starbucks' revenue grew by 76% y-o-y to Rs. 636 crore and it broke even at EBITDA level (net loss declined significantly on a y-o-y basis). Balance sheet continues to strengthen: Strong focus on supply efficiencies and distribution synergies aided the company to reduce its working capital days to 26 days in FY2022 from 36 days in FY2021. OCF to EBITDA stood at 102% in FY2022 compared to 114% in FY2021. The company repaid long-term debt of Rs. 493 crore in FY2022. Despite capex of Rs. 273 crore, repayment of long-term debt, and higher investment in strategic initiatives, cash balance on books stood strong at Rs. 2,600 crore.

Brokerage Maintains Buy Call with Target Price of Rs. 960

Tata Consumer Products Limited is focusing on enhancing shareholders' value by simplifying its structure and unlocking significant financial value while generating consistent earnings growth focusing on its six-pillar growth strategy. Strong cash flows will be utilised for organic and inorganic initiatives to strengthen the key growth pillars in the coming year. "With strategies in place, Tata Consumer Products Limited is well poised to achieve double-digit revenue and PAT CAGR of 15% and 20%, respectively, over FY2022-FY2024. The stock is currently trading at 53.1x and 43.6x its FY2023E and FY2024E EPS, respectively. We maintain our Buy recommendation on the stock with an unchanged price target (PT) of Rs. 960," the brokerage has said.

The brokerage also commented on the key risks for the company, and said, "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."

Company Overview - Tata Consumer Products Ltd.

Tata Consumer Products Ltd., incorporated in the year 1962, is a Large Cap Tata Group FMCG sector company, headquartered in Mumbai, Maharashtra, India. The company manufacturer and marketer of non-alcoholic beverages, with a major focus on tea and coffee. The company markets tea and coffee products under Tata Tea, Tata Coffee Grand, Eight O'Clock Coffee, Vitax, Tetley, and Joekels brand names, while it merchandises packaged water under Himalayan, Tata Water Plus, and Tata Gluco Plus brand names. The company also offers food products such as spices, healthy snacks, pulses, salt, breakfast cereals, poha and ready-to mixes under Tata Salt, Tata Sampann, and Tata Soulfull brands. The company's business operations span across Asia-Pacific, Europe, the MEA and North America.