With a market capitalisation of Rs. 90,634 crores, the shares of the company started Tuesday’s trading session on a higher note at Rs. 953 compared to its previous close of Rs. 949.70. The share hit a high of Rs. 978, gaining around 3 percent, also recorded as company’s fresh 52 weeks high.
Having a look at the latest financial statements published by Tata Consumer Products Ltd, the revenue and profits have shown a positive movement.
The revenue increased marginally by around 1 percent from Rs. 3,741 crores in the June quarter to Rs. 3,734 crores in the September quarter. In addition, the net profit increased by 7 percent from Rs. 338 crores to Rs. 364 crores during the same timeframe.
Due to consistent operating revenue and profits on a YoY basis, the profitability metrics of the company increased with the return on equity (RoE) increasing from 7.28 percent during FY 21-22 to 11.21 percent in FY 22-23.
Moreover, the return on capital employed (RoCE) showed an upward movement from 9.6 percent to 11.21 percent during the same timeframe. The net profit margin increased from 8.68 percent during FY 21-22 to 9.77 percent during FY 22-23.
Motilal Oswal, one of the well-known brokerage firms, has given a ‘Buy’ target on the company’s stock with a target of Rs. 1,110 indicating a potential upside movement of around 15 percent compared to its current market price.
The investment rationale for providing such a recommendation pertains to its distribution network. The company’s India tea business reported a 3 percent volume growth from January to September 2023, led by steady domestic demand. Despite the volume growth, the company has been losing market share for the last three quarters due to the resurgence of small players.
The brokerage firm mentioned that the company is confident of making up for the lost share through the expansion of its distribution network and powering up brands and they expect 5 percent volume growth in H2 FY24.
The company bought the majority of its tea during the second flush, i.e., Q1FY24, which saw flat tea prices YoY. Meanwhile, gross margins of the company’s tea business improved marginally over the last three quarters, supported by volume growth.
The broker expects tea prices to remain flat due to muted production growth and they expect the gross margin of Tata Consumer Products to remain stable or improve slightly.
Tata Consumer Products Ltd follows a two-pronged growth approach, firstly focusing on new growth engines such as Tata Sampann, NourishCo, Tata Soulfull and the ready-to-eat business (Tata Smartfoodz). Secondly rapidly scaling up its distribution network along with digitization prowess across the supply chain, which will drive the next leg of growth.
Due to the above-mentioned reason, the brokerage firm expects revenue, EBITA, and PAT CAGR of 10 percent, 15 percent, and 22 percent respectively over FY23 to 26.
Headquartered in Kolkata, Tata Consumer Products Ltd was incorporated in 1962. It is one of the leading companies of the Tata Group, with a presence in the food and beverages business in India and internationally. It is the second-largest tea company globally and has a significant market presence and leadership in many markets.
Written By Vaibhav Patil
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