Buy Tata Consumer Products, target price Rs 925: ICICI Securities

ICICI Securities has buy call on Tata Consumer Products with a target price of Rs 925.0. The current market price of Tata Consumer Products is Rs 775.7.

Tata Consumer Products, incorporated in the year 1962, is a Large Cap company (having a market cap of Rs 72125.24 crore) operating in FMCG sector.

Tata Consumer Products key Products/Revenue Segments include Tea, Other Operating Revenue, Royalty Income, Export Incentives for the year ending 31-Mar-2021.


Financials
For the quarter ended 31-03-2022, the company has reported a Consolidated Total Income of Rs 3222.80 crore, down -.33% from last quarter Total Income of Rs 3233.42 crore and up 4.63% from last year same quarter Total Income of Rs 3080.18 crore. Company has reported net profit after tax of Rs 289.24 crore in latest quarter.

Investment Rationale
As impact of tea commodity inflation was largely over by 1HFY22, Tata Consumer Products (TCPL) has continued to report strong improvement in profitability, as expected. That said, Beverages and Foods volume growth of +3% and -1% appears underwhelming, not entirely surprising though, ICICI Securities said.

The brokerage remains (structurally and long term) positive on TCPL as it has achieved dual targets of (1) EBITDA margin expansion of 411bps YoY and (2) market share gains of 100bps in India Tea and 400bps in Salt.

It has continued to invest in distribution and premiumization. It (1) has expanded rural / semi urban distributors by 4x in FY22, (2) plans to expand direct reach to 1.5mn outlets by end of FY23 and (3) introduced differentiated variants of salt such as Tata Salt Immuno (with zinc).

TCPL’s premiumization and distribution efforts also resulted in Sampann and Coffee volume growth of 28% and 45% YoY, respectively. The brokerage also expects the benefits of simplification of corporate structure to be unlocked in FY23-24. Starbucks remained EBITDA positive in Q4FY22 even after adding 23 stores, highest ever in one quarter. We reckon there will be opportunities in stock volatility for long-term investors, it added.