Buy Tata Consumer Products: target of Rs 740: Sharekhan

Sharekhan's research report on Tata Consumer Products

In Q4FY21, Tata Consumer Products (TCPL)’s margins missed the mark and stood at 9.9% (vs. our street expectation of 11-12%); Revenue growth stood strong at 26% to Rs. 3,027 crore while Adjusted PAT stood at Rs. 181 crore (vs. our and street expectation of Rs. 190-195 crore). India beverages business grew by 60% (volume growth of 23%); India foods biz revenues rose by 22% (volumes grew 21%), while Tata Coffee saw a 31% largely volume-led growth. Tata Starbucks became EBIDTA Positive in FY2021; business recovered to 98% in February. Demand for staples/ daily consumption item to remain stable in the coming months. However, local lockdowns and restricted business hours might lead to near-term supply disruptions; domestic tea prices are likely to moderate in new crop season. We have reduced our FY22 earnings estimates by 4%, while we broadly maintain them for FY2023.

Outlook

We maintain our Buy recommendation with target price of Rs. 740.