scorecardresearchMotilal Oswal Investment Idea: Tata Consumer to hit ₹900 in 12 months

Motilal Oswal Investment Idea: Tata Consumer to hit 900 in 12 months

Updated: 22 Jun 2022, 02:10 PM IST
TL;DR.

Domestic brokerage house Motilal Oswal expects Tata Group firm Tata Consumer Products to jump 27 percent going ahead. The brokerage has a 'buy' call on the stock with a target price of 900.

Domestic brokerage house Motilal Oswal expects Tata Group firm Tata Consumer Products to jump 27 percent going ahead. The brokerage has a 'buy' call on the stock with a target price of  <span class='webrupee'>₹</span>900.

Domestic brokerage house Motilal Oswal expects Tata Group firm Tata Consumer Products to jump 27 percent going ahead. The brokerage has a 'buy' call on the stock with a target price of 900.

Domestic brokerage house Motilal Oswal expects Tata Group firm Tata Consumer Products to jump 27 percent going ahead. The brokerage has a 'buy' call on the stock with a target price of 900.

Even though the stock has outperformed benchmarks in 2022 so far, it has still given negative returns. It has lost around 5 percent this year so far as against an 11 percent fall in benchmarks. However, in the last 1 year, the stock is down 2 percent, in line with Indian markets.

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Motilal Oswal noted that Tata Consumer is reorganising its business through the acquisition of Tata Coffee and the purchase of minority interest in UK business from Tata Enterprise Overseas. This would help in synergies through creating a vertical for plantations, cost and material synergies, and a single holding company for international branded business, it explained.

It further pointed out that 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 (+100bp YoY) and Salt (+400bp YoY) as of March 2022,

The company is also establishing a strong Sales & Distribution channel, which will act as a key growth driver, the brokerage added.

Tata Consumer Products is engaged in the trading, production and distribution of consumer products. The Company operates through two segments: Branded and Non-Branded. The branded segment includes the sale of branded tea, coffee and water while the non Branded segment is involved in the plantation and extraction business for tea, coffee and other produce in India, Vietnam and the United States.

Despite multiple headwinds, Tata Consumer reported an over three-fold jump in consolidated net profit at 239.05 crore for the fourth quarter ended March (Q4FY22). It had posted a net profit of 74.35 crore in the year-ago quarter. Its revenue from operations rose 4.54 percent at 3,175.41 crore during the quarter under review as against 3,037.22 crore in the same period a year ago.

Meanwhile, Edelweiss Securities, in a recent note, stated that Tata Consumer has two steady base businesses – salt and tea which have the potential for sustaining high single-digit to low-double-digit growth in revenue. The company’s newer businesses – pulses and spices are currently small but have huge scope for growth, it added.

ICICI Securities also said that the company's transformational journey continued in FY22. "It achieved rapid progress in distribution expansion and introduced multiple innovative products to drive premiumization and market share gains. It integrated three acquisitions (Soulfull, Nourishco, Tata Q) quickly, and plans to reap benefits in FY22-24," noted the brokerage.

It added that the firm continues to gain market shares in Tea and Salt. The brokerage retained a 'buy' call on the stock, though it reckons near-term business volatility may lead to stock volatility.

Meanwhile, Motilal Oswal noted that the management guided at double-digit growth, with a constant expansion of its portfolio. It expects a sales/EBITDA/PAT CAGR of 10 percent/19 percent/29 percent over FY22-24.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.

 

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First Published: 22 Jun 2022, 02:10 PM IST