The stock of Tata Consumer Products has moved at a very slow pace this year even as the FMCG index has witnessed sharp gains.
Year-to-date (YTD), Tata Consumer Products stock is up 8% (as of September 20) against a 17% gain in the BSE FMCG index and a 2.5% gain in the equity benchmark Sensex.
The stock hit its 52-week high of ₹864.50 on September 21, 2021; at present, it is 7% below its 52-week high level. On the other hand, the BSE FMCG index hit its all-time high of 16,278.65 on September 21, 2022. Sensex is 4% below its all-time high of 62245.43 which it hit on October 19, 2021.
The fundamental prospects of the company, which deals in the tea & coffee segment, are improving which seems to have attracted positive views from brokerage firms.
Domestic brokerage firm Motilal Oswal Financial Services expects the company’s sales, EBITDA and PAT CAGR of 11%, 19% and 31%, respectively, over FY22-24.
The brokerage firm has a buy call on the stock with a target price of ₹890, implying an 11% upside in the stock price from the current levels.
Motilal Oswal highlighted the company’s management’s holistic strategy which aims at strengthening and accelerating its core business and exploring new opportunities.
It also aims at unlocking synergies, digitisation of the supply chain, expansion of its product portfolio and innovation enhancing its focus on premiumisation and health and wellness products, embedding sustainability and expanding its sales and distribution infrastructure, supply chain, and capability building toward being a multicategory FMCG player, Motilal Oswal said.
Motilal observed that the unlocking of sales and distribution synergies from the merger of group companies has started to yield results which can be seen in the market share increase in tea (up 40bp YoY) and salt (up 400bp) as of Jun’22, backed by the rise in numeric distribution.
The company is establishing a strong sales and distribution (S&D) channel, which will act as a key growth driver, said Motilal Oswal.
Moreover, Tata Consumer is showing strong intention to expand its food and beverage (F&B) segment with new product launches.
“The company is on a portfolio expansion spree in its F&B segment, with product launches in new and innovative categories such as the launch of Tata ORS+ with glucose and electrolytes and its recent foray into the protein platform, with the launch of a plant-based meat product,” Motilal Oswal said.
The brokerage firm believes that the food business is expected to be the growth engine for the company, with Tata Sampann leading from the front.
While fundamental factors look improved, technical indicators are giving mixed signals. Technical analysts are divided in their views of the stock.
Brokerage firm Prabhudas Lilladher believes the stock is poised for gain in the short term; the brokerage firm recommends a ‘buy’ and has a target price of ₹880 and a stop loss of ₹770 for the stock.
“The stock has been in a trending mode and now has made a higher bottom formation pattern in the daily chart and is poised to rise further upward. The indicators have been favourable and look attractive for an up move in the coming days. With also good volume participation supporting our positive bias, we recommend a buy in this stock for an upside target of ₹880 while keeping a stop loss of ₹770,” said the brokerage firm.
On the other hand, Jigar S. Patel, Sr. Manager - Equity Research, Anand Rathi Share and Stock Brokers is of the view that one should avoid this counter at the current market price.
“Fresh buying in this counter is not advisable at the current market price. The stock tried to retest its previous historical top of ₹880 on the weekly chart but it failed. Over nearly the last three months, the stock has seen a 24% appreciation. If one is already holding, then one should book some profits between ₹840-850 levels,” said Patel.
“Weekly ‘stochastics’ has failed twice from being overbought which is a sign of caution (refer to the chart given below). Also, selling volume is increasing at higher levels which is hinting toward a short-term pause or possible pullback. MACD on the weekly scale is losing steam which is an anomaly for the current price action,” said Patel.
According to a MintGenie poll, an average of 23 analysts have a ‘buy’ call on the stock.
Disclaimer: The views and recommendations given in this article are those of individual analysts and broking firms. These do not represent the views of MintGenie.