Buy Tata Consumer Products; target of Rs 775: Motilal Oswal

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Motilal Oswal's research report on Tata Consumer Products

Revenue from the India Food business grew 18% YoY (to INR24.4b), which can be attributed to the 17% increase in the Salt business in FY21, along with Tata Sampann whose portfolio grew 26%. EBIT margin expanded by 300bp to 15.9% (or INR3.9b). The India Food business - comprising Tata Salt and Tata Sampan, which includes pulses, spices and condiments, and ready-to-cook (RTC) - is expected to drive a major shift to the organized from the unorganized sector. The segment should drive the next phase of TCPL's growth. India's pulses/spices market is valued at INR1,500b/INR600b, with the share of organized branded players pegged at 1%/30%. Both segments are estimated to grow significantly on the back of higher health consciousness and growing importance of hygiene among the populace. A strong brand like Tata Sampann, is expected to gain substantially from this transition. The Indian Branded Salt market is estimated at INR60b. Tata Salt recorded 19% volume growth to ~1.3MT in FY21. Value contribution from the premium portfolio grew to 3.5% in FY21 (v/s 1.8% in FY20). Rock Salt scaled up by 3x in FY21, which also contributed to growth in the Salt business. Tata Salt further strengthened its market leadership position, with value share increasing by 180bp to 33% in the Packaged Salt category.

Outlook

We expect a revenue/EBITDA/PAT CAGR of 9%/21%/27% over FY21-23E and arrive at an FY23E SoTP-based TP of INR775/share. Maintain Buy.

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