Tata Consumer Q2 results preview: PAT may fall 5% YoY; new businesses to drive revenue higher

FMCG company Tata Consumer Products is expected to report healthy growth in its second quarter sales, owing to solid show in new businesses, but the bottomline may fall due to higher depreciation and finance costs.

Net profit for the quarter is seen declining 5% year-on-year, according to an average estimate of four brokerages, while revenues are seen growing 15% year-on-year.

Analysts expect Rs 320 crore in revenue from Capital Foods and Organic India combined. The margins from these businesses will be ahead of consolidated margins given the synergies playing out post integration and pilot projects being taken up in pharma and food channels.


In the preceding June quarter, Tata Consumer reported 8% fall in its consolidated net profit to Rs 290 crore and revenues rose 16% year-on-year.

Here's what brokerages expect from Tata Consumer Q2:

Nuvama

Revenue/EBITDA shall grow 15.1%/15.9% YoY. India beverage business (LTL) is likely to decline 4% YoY with negative volumes (3%) in tea. In Q2FY25, we expect Tata Consumer to witness some benefit of older inventory in tea, which shall allow it to take some price hikes across few SKUs. However, from Q3, tea margins shall likely be under pressure, but a gradual pricing has started. Nourish Co: We expect it to grow 4% YoY.

India foods business (LTL) revenue is likely to grow 14% YoY. In Foods, we expect Sampann and Soulfull to do well given strong growth. We anticipate salt to grow 6.5% YoY within which value-added salt to post stronger growth.

International business has done well and is likely to grow 6% YoY in CC terms. We estimate YoY improvement in International business margins due to improvement started in US coffee.

Non branded: We expect it to grow 25% YoY due to high realisation in coffee. We reckon gross margins shall expand 230bp YoY to 44.8% while EBITDA margins shall expand mere 10bp YoY.

Due to higher interest (two months impact on rights issue) and amortisation cost (related to acquisitions) we expect a 10% decline in PBT levels. However, a decline at PAT level to be lower at 4% due to integration of business verticals attracted to lower tax rate.

Kotak Equities

We model 7% YoY organic growth in consolidated revenues led by volume/value growth in domestic tea, 12% YoY organic growth in India foods business, 1% YoY growth in NourishCo, MSD-to-HSD growth in international tea and US coffee.

We expect Rs 220 crore and Rs 96 crore revenues from Capital Foods and Organic India, respectively. Non-branded businesses are expected to report robust 30% growth to Rs 500 crore.

We expect 16% YoY growth in consolidated EBITDA aided by acquisitions. On an organic basis, we expect consolidated EBITDA growth of 5% entirely driven by commodity gains (coffee) in the non-branded business and improvement in profitability in international operations.

We expect EBITDA of the core domestic portfolio (tea + foods) to decline YoY due to margin pressure in tea.

Motilal Oswal

We expect revenue to grow 13.5% YoY, led by higher growth from new businesses. Capital foods and organic segments are expected to witness margin expansion. EBITDA margin is likely to contract to 13.8% in 2QFY25 vs. 14.4% in 2QFY24. High tea costs are expected to weigh on the Indian tea business.

YES Securities

We expect India Foods volume growth to be 10% YoY and -1% YoY for the India beverages business. Revenue growth for the quarter to be 16.6% YoY including the impact of Capital foods and Organic India. Overall GM is expected to expand by 190 bps YoY (but down 50 bps QoQ).

However, increase in overheads will limit the EBITDA margins expansion by just 30 bps YoY to 14.7%. EBITDA is expected to increase by 19.2% YoY while APAT is expected to down by -1.8% YoY owing to higher depreciation & finance cost as well as lower other income.

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