Tata Consumer Products, which sells tea, salt, spices, and other consumer products, has delivered stellar returns in the last five years despite rising inflation and a pandemic that threatened growth. ICICI Securities in its recently published report recommended investors buy the stocks of Tata Consumer Products Ltd for a target price of Rs 925/share. Tata Consumer Products Ltd’s transformational journey continued in FY22. It achieved rapid progress in distribution expansion – 2x direct reach in FY20-22 and introduced multiple innovative products to drive premiumization and market share gains.
Stock Price History
June 23, stocks of the company surged 1.28 per cent from the previous close and ended at Rs 718.45/share. It was opened at Rs 710/share. The stock touched the 52-week low at Rs 650.20/share on March 7, 2022, and 52 weeks high at Rs 889/share. The stocks have given positive returns of 174.43 per cent in the last 3 years and massive multi-bagger returns of 375.32 per cent in 5 years.
Tata Consumer Products Ltd., incorporated in the year 1962, is a Large Cap company (having a market cap of Rs 66019.96 Crore) operating in FMCG sector.
Investment Rationale
TCPL’s transformational journey continued in FY22. It achieved rapid progress in distribution expansion – 2x direct reach in FY20-22 and introduced multiple innovative products to drive premiumization and market share gains. It integrated three acquisitions (Soulfull, Nourishco, Tata Q) quickly, and plans to reap benefits in FY22-24. While ad spends have increased to 6.8 per cent in FY22 from 6.3 per cent in FY21, they are still lower than pre-covid levels of 7.7 per cent (avg: FY17-20). It continues to gain market shares – 100bps in Tea and 400bps in Salt. In FY22, working capital increased to 71 days (from 39 days in FY21), FCF generation was Rs4.7bn (0.6 per cent FCF yield) and core-RoE improved 80bps to 13.7 per cent (YoY).
What Do Analysts Say?
ICICI Securities has buy call on Tata Consumer Products with a target price of Rs 925. The current market price of Tata Consumer Products Rs 714.85. has buy call on Tata Consumer Products with a target price of Rs 925. The current market price of Tata Consumer Products.
Jefferies initiating coverage on the stock earlier this month said the rally may not stop here. The broker set a bull case target of Rs 1,060 (translating into 40 per cent upside) and a base case target of Rs 960 (translating into 28 per cent upside) for the next 12 months.
“Tata Group’s consumer businesses’ consolidation has transformed Tata Consumer into a strong food and beverages play,” said Vivek Maheshwari, Equity Analyst at Jefferies. “India business (70 per cent of revenue) has a diverse mix of leading brands and high-growth segments, while slow-growing international business has improved profitability. Unique portfolio offers better margin visibility, a key differentiator versus peers.”
According to the analyst, the biggest strength of the company is its salt and tea business. They form the bedrock of its India business and share similar traits, albeit with some differences. In salt, Tata Consumer leads the market with a 38 per cent share, and in packaged tea, it’s a strong number 2 with a 22 per cent share.
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