Brokerage firm Motilal Oswal has set an upside target of more than 20 per cent on the stock of Tata Consumer Products with a target price of Rs 431, as against its current market price of Rs 355.
"We maintain our estimates for FY21/FY22 as Tata Consumer Products deals in salt/tea/coffee, for which demand has not been materially impacted due to COVID-19; however, the company faced certain issues pertaining to the supply chain, which is returning to normal day by day (for India)," the brokerage firm has said in its latest report on Tata Consumer products.
"Tata Group has a clear focus on leveraging its brand and participating in India's consumption story of Rs 30 trillion, which resulted in the merger of Tata Chemicals' Consumer business with itself.
The merger of Tata Chemicals' Consumer business with Tata Consumer Products is in line with Tata Group's focus on creating a single FMCG-focused company. The merger offers multiple synergies, including higher outlet coverage, focused new product development, stronger cash flow generation, and scale efficiencies" the firm said.
Moreover, it believes that in the short to medium term, the new CEO, Mr Sunil D'Souza would focus more on marketing under-penetrated food products such as pulses, besan (gram flour), spices, and chilla mix, aggressively leveraging the existing strong distribution network and Tata brand.
Highlights from management commentary, according to the Motilal Oswal Research report reveals that Tata Starbucks clocked revenue growth of 21% for FY20.
Apart from this, it added 39 new stores during the year, taking the current store count to 185 stores across India. Q4 operations were adversely impacted due to the closure of all stores during the lockdown period. The company has now opened 40 of its existing stores across seven cities for deliveries and takeaways.
The new plant in Vietnam is running at 85-90% utilization levels within its first year of operation. It achieved the highest quarterly sale of 1,050MT
"We value the stock on an SOTP basis and arrive at a target price of Rs 431. Maintain Buy," the firm said in its report.