Buy Tata Consumer Products; target of Rs 1385: ICICI Securities

ICICI Securities is bullish on Tata Consumer Products recommended buy rating on the stock with a target price of Rs 1385 in its research report dated September 10, 2024.

Broker Research

September 11, 2024 / 10:32 IST

Buy

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ICICI Securities research report on Tata Consumer Products

Our analysis of Tata Starbucks financials over FY14-24 indicate (1) It had revenue CAGR of 29% over FY14-24 and store count CAGR of 26%. The revenue/store has remained flat at ~INR 35mn. (2) The gross margins of Tata Starbucks (TS) and Starbucks Corporation (SBUX) are similar at ~67%. We believe TS can potentially reach >20% EBITDA margin (SBUX EBITDA margin: ~18%) and (3) TS plans to reach 1,000 outlets by FY28 (421 in FY24). Plan appears ambitious, probably triggered by (1) vacuum caused by partial exit of Café Coffee Day (though TS is far more premium positioned) and (2) rise of new chains (Blue Tokai, Third Wave etc). We model EV of Tata Starbucks at INR 211bn (EBITDA multiple of 24x). In TCPL’s SoTP, we attribute INR 91/share for Tata Starbucks.

Outlook

We model TCPL to report revenue and PAT CAGRs of 15.8% and 18.9%, respectively over FY24-26E led by improvement in profitability of India Foods and revival in profitability of international business. We maintain BUY and value the stock at unchanged TP of INR 1,385.

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