Buy Tata Consumer Products; target of Rs 1010: Sharekhan

Sharekhan's research report on Tata Consumer Products

Tata Consumer Products Limited’s (TCPL’s) Q1FY24 performance was broadly in-line, with revenues rising by 12.5% y-o-y to Rs. 3,741.2 crore, OPM expanding by 82 bps y-o-y to 14.6% and adjusted PAT growing by 23.2% y-o-y to Rs. 362.4 crore. India growth businesses clocked yet another strong quarter (58% y-o-y combined growth) driven by 60% y-o-y growth in NourishCo and 51% y-o-y growth in Tata Sampann, while Tata Soulfull maintained strong growth trajectory. Going ahead, growth is likely to be driven by distribution expansion, innovation and marketing with mid-high single digit volume growth in the tea and salt segments and high growth in other businesses. Cost efficiencies and scale-up of new businesses would drive up margins.

Outlook

Stock trades at 53.6x/44.9x its FY2024E/FY2025E earnings. We maintain Buy with an unchanged PT of Rs. 1,010. Robust earnings visibility and improving cash flows make it a good pick in the FMCG space.