Tea consumption in India continues to be a daily ritual for millions, with a steady preference for traditional brands like Tata Tea, Tetley, and Good Earth Teas. The recent budget announcement of a rebate of up to ₹12 lakh for individual taxpayers is expected to boost consumer confidence, particularly in discretionary spending. With more disposable income, consumers may increasingly indulge in premium or specialty products, such as Tata Consumer Products’ range of teas.
Tata Consumer, a leading player in the tea segment, offers a wide variety of blends, catering to different tastes and preferences. The rebate could further enhance demand for these products, as more consumers may opt for quality tea and health-focused infusions, bolstering the company’s market position.
Share Price
The shares of TATA Consumer Products Limited are currently trading at Rs. 1,040 down by 2.79% from its previous close of Rs. 1,069.85 as of February 03, 2025. The stock also touched an intraday high of Rs. 1,074.
Recent Updates
Tea prices have decreased by ₹17.71 per kg, or 10.41%, since the beginning of 2025, with the commodity currently trading at ₹152.36 per kg, according to trading data on a contract for difference (CFD) that tracks the benchmark market. This price drop has led to improved margins for companies like Tata Consumer Products.
The decrease in international tea prices—₹17.71 per kg—reflects a notable reduction, benefiting tea manufacturers by lowering procurement costs, thus enhancing profitability in the current market environment.
Target Price and Rating
KR Choksey has maintained an ‘ACCUMULATE’ rating on Tata Consumer Products with a target price of ₹1,120, as per their research report dated February 1, 2025. This target is based on a P/E multiple of 50x for FY27E EPS of ₹22.5, a slight reduction from their earlier target of ₹1,136. The current stock price valuation stands at 53.8x/45.6x for FY26E/FY27E, respectively, which implies moderate upside potential for investors.
Q3FY25 Performance
Tata Consumer Products reported a 16.8% year-on-year revenue increase for Q3FY25, amounting to ₹4,443.6 crore, beating estimates by 2.1%. However, EBITDA declined by 1.3% YoY to ₹5,64.7 crore, missing expectations due to higher operating expenses.
The EBITDA margin contracted by 234bps YoY to 12.7%, which was 184bps lower than expected. Adjusted net profit also fell by 23.0% YoY to ₹285 crore, primarily due to increased depreciation and interest expenses.
Challenges and Lowered EPS Estimates
The lower-than-expected Q3FY25 performance has led KR Choksey to revise their earnings per share (EPS) estimates for FY26E and FY27E by 7.6% and 9.0%, respectively. The company faced challenges in the last year in terms of raw material inflation and margin pressure from rising tea and coffee costs. Despite this, the long-term growth outlook remains strong, with a projected CAGR of 13.6% in revenue, 15.8% in EBITDA, and 14.6% in adjusted PAT over FY24-FY27E.
Outlook and Future Growth
KR Choksey remains optimistic about Tata Consumer Products’ future growth prospects. The company’s strong market position, strategic pricing, expansion into premium segments, and increasing international market opportunities are expected to drive long-term growth. These factors justify their ‘ACCUMULATE’ rating, indicating confidence in the stock’s ability to deliver consistent performance despite short-term challenges.
Written By: Dipangshu Kundu
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