Buy Tata Consumer Products; target of Rs 900: Anand Rathi

Anand Rathi's research report on Tata Consumer Products

Tata Consumer Products reported consolidated revenue growth of 14% YoY (12% in constant currency) to Rs 36,187 million during Q4-FY23 as compared to Rs 31,754 million during Q4-FY22. The growth was driven by growth in both branded and Non-branded business. Geographically, India business registered strong growth of 15% while international business grew 6% (constant currency); on a like-to-like basis 1% (excluding acquisitions). The company reported EBITDA of Rs5,117 million in Q4-FY23 as against Rs4,443 million in Q4-FY22, an improvement in margins by 15 basis points. The profit after tax was recorded at Rs2,658 million during Q4-FY23 as against Rs2,459 million in Q4-FY23. The India business of the company grew 15% in the quarter with India Beverages business growing at 8%, with tea volumes returning to growth, up 3% YoY. India Foods business continued its strong trajectory, with volumes up by 8% in the quarter. The Salt business margin was almost back to the normative range.. The International business recorded 11% revenue growth (1% ex acquisitions in constant currency). TheEBITDA margins in international business was lower by 1% mainly due to commodity/input cost inflation and lag in price increases. The company has started to take price action in international business which is expected to fully flow through in subsequent quarter.

Outlook

Tata Consumer with its presence in high growing categories supported by consumption shift to packaged food. Moreover, tailwinds of at-home consumption should continue to aid growth. Higher volume traction in India business, digitization across the supply chain coupled with synergy benefits in upcoming periods are the key growth drivers. We continue to remain positive on the stock and maintain our rating to BUY on the stock with a revised target price of Rs 900 per share.

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