Buy Tata Consumer Products; target of Rs 1270: Motilal Oswal

Motilal Oswal's research report on Tata Consumer Products

Tata Consumer Products (TATACONS) reported 10% revenue growth in 1QFY26, while EBIT declined 12% YoY. EBIT was affected by higher input costs in the Branded business (India/international business EBIT down 11%/12% YoY) and declining coffee prices in the non-branded business (EBIT down 33%). However, with moderating tea prices and improving product mix (higher sales of premium tea), consol margins are expected to expand from 2QFY26, led by better gross margins in the tea business, as indicated by management. The company has guided for consolidated EBITDA margin to gradually reach ~16% by 3Q. Factoring in the improving margin trajectory, we increase our FY26/FY27 EBITDA estimates by 7%/3%. We reiterate BUY with an SoTP-based TP of
INR1,270.

Outlook

We expect TATACONS to clock a CAGR of 10%/12%/13% in revenue/EBITDA/PAT during FY25-27. Reiterate BUY with an SoTP-based TP of INR1,270.