Buy Tata Consumer Products; target of Rs 910: Motilal Oswal

Motilal Oswal is bullish on Tata Consumer Products recommended buy rating on the stock with a target price of Rs 910 in its research report dated May 23, 2023.

Broker Research

May 24, 2023 / 22:46 IST

Buy

Motilal Oswal's research report on Tata Consumer Products

TATACONS’s FY23 annual report focuses on the management’s strategic initiatives to strengthen its foundation by expanding its distribution reach and presence, accelerating growth through portfolio expansion, exploring new opportunities, and placing emphasis on innovation. The key takeaways are: The Indian growth business grew 53% YoY, led by robust growth of 80% YoY in NourishCo. Tata Sampann grew ~29% YoY, while Tata Soulfull has doubled its revenue during the year. The direct distribution network of the company has tripled to ~1.5m outlets in FY23 from ~0.5m in 2020, while the total reach has expanded to ~3.8m outlets. Modern Trade/ Ecommerce accounts for ~14%/9% of India business in FY23. TATACONS is focusing on five key platforms (Current core, pantry, liquids, mini meals, and protein) to expand its total addressable market in a bid to become a formidable FMCG player. In FY23, the company has doubled its launches, reaching ~34 new products. Further, it possesses the necessary infrastructure to launch ~200 new products annually. In FY23, the International business grew in high single digits. However, owing to input cost inflation and adverse currency movements, the company’s profitability was severely impacted. TATACONS has taken corrective price actions and implemented structural cost-saving changes, resulting in sequential margin improvement.

Outlook

We expect a revenue/EBITDA/PAT CAGR of 9%/15%/24% over FY23-25 and arrive at our SoTP-based TP of INR910. We reiterate our BUY rating.

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