Tata Consumer Products Ltd (TCPL) gained more than 5 percent to hit a 52-week high of Rs 864 in the morning session, as analysts said the worst was over for the company's India tea business and they expect the stock to do well in the current financial year.
Nuvama Institutional Equities retained its “buy” rating on the Tata group company stock but raised the target price to Rs 925 from Rs 895.
The Indian tea business and international margins took a hit in early FY23 due to inflationary pressures and softened volumes. With the normalising of prices and strengthening demand, analysts expect the TCPL stock to perform well in the current financial year.
"The base businesses of packaged tea and salt have the potential for high single-digit revenue growth on the back of expanded distribution, scope to gain share from the unorganised market and premiumisation," analysts at Nuvama said.
At noon, the trading volume was 4.4 million shares, four times the one-month average of 1.3 million shares for this time of the day.
TCPL was looking to be a leading player in the FMCG industry by expanding its play in existing categories and venturing into new spaces, the Nuvama report said.
Addressing shareholders at the annual general meeting, Tata Consumer Products Ltd (TCPL) Chairman N Chandrasekaran said, "TCPL has been on a transformative journey and has made significant progress during the last three years into becoming and evolving as a leading FMCG company."
“The company will tap into new consumers and markets along with the Tata Coffee merger which shall unlock synergies through a wider consumer base and combined expertise on the back-end,” said the analysts at Nuvama.
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In FY23, TCPL net revenue was up 11 percent from the previous year at Rs 13,784.1 crore. The adjusted profit rose 8 percent to Rs 1,162 crore and EBITDA grew 8 percent to Rs 1,857.4 crore. The company reported a 23 percent sales increase for its salt business, driven by surge in value added salts.
The Starbucks segment’s revenue surged 71 percent YoY and Himalayan water grew 85 percent YoY. The merger with Tata Coffee due for H1FY24 is expected to aid revenue surge, it said.
Tata Consumer is trading 55 times its estimated earnings a share for the coming year. It trades at 65 times trailing EPS.
The stock has 20 “buy”, three “hold” and one “sell” recommendations.
At 1.28 pm, the stock was trading at Rs 860.30 on the National Stock Exchange, up 4.93 percent from the previous close.
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