Tata Consumer Products Is A Stock To Buy, Says Broking Firm Motilal Oswal

Revenues grow 20% for Tata Consumer Products

According to Motilal Oswal, in FY21, Tata Consumer Products consolidated revenue grew 20% YoY, driven by volume growth of 12%/11% in India Beverages/Foods and tea price inflation.

"Operating leverage and lower ad spends aided EBITDA growth of 19% YoY in FY21. This despite gross margin contracting by 330 basis points to 40.5%. The underlying numbers were better given the double-digit volume growth in the base business, despite COVID-related disruptions. Overall performance was impacted by tea price inflation. The same is likely to taper down in the near term and bodes well for Tata Consumer Products," says the broking firm.

Building Tata Sampann, which should help says Motilal Oswal

The company is building Tata Sampann, which deals in pulses and spices. "This should grow in high double-digits. The market size for pulses/spices in India currently stands at Rs 1,500/billion and Rs 600 billion, with unorganized players constituting 99%/70% of the market. Growth is expected through the capture of market share from unorganized players via an increasing distribution reach and new product launches," the brokerage has said.

Buy the stock of Tata Consumer Products for a price target of Rs 1,000

According to Motilal Oswal. the unlocking of sales and distribution synergies from the merger of group companies has started to yield results.

"This is evident from the market share increase in tea (+190 basis points YoY) and salt (+160bp) in FY21 (and 1QFY22) on the back of an increase in numeric distribution. Direct coverage rose 30% in FY21, and the management aims to reach 1m by Sep'21. The company is establishing a strong S&D channel, which would act as a key growth driver. We expect a sales/EBITDA/PAT CAGR of 10%/18%/23% over FY21-24E. We arrive at an FY24E SoTP-based target price of Rs 1,000 per share. We maintain our Buy rating," the brokerage has said.

Disclaimer

Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage houses are not liable for any losses caused as a result of decisions based on the article. The above stock is taken from the research report of broking firm Motilal Oswal. Investors are also advised caution as the stock markets have seen a meteoric rise in the last few weeks.