Tata Consumer Shares Plunge 5% After Mixed Q4 Numbers, Brokerages Remain Bullish

Tata Consumer Products stock emerged as the top Nifty50 loser, falling as low as 5.7 per cent to hit an intraday low of Rs 1,106.00
Stocks To Watch
Stocks To Watch

Tata Consumer Products' share price fell over 5 per cent on Wednesday morning after the Tata Group’s FMCG company reported a mixed bag of numbers in the March quarter of FY24.

The stock emerged as the top Nifty50 loser, falling as low as 5.7 per cent to hit an intraday low of Rs 1,106.00. At 11:00 am, the stock was trading 5.2 per cent down at Rs 1,112.30 on the NSE.

However, the brokerage firms remained bullish on the stock, despite the net profit falling under the market estimates, as EBITDA margins surpassed expectations.

The company’s EBITDA (earnings before interest, taxes, depreciation, and amortization) for the March quarter grew 23 per cent to Rs 629.6 crore, compared to Rs 511.7 crore in the same period last year.

The FMCG major reported a net profit of Rs 217 crore for the March quarter, a decline of 19 per cent from Rs 269 crore in the year-ago period. Revenue surged 8.5 per cent year-on-year (YoY) to Rs 3,927 crore in the reported quarter.

The company’s India business grew 10 per cent YoY led by solid 20% growth in the foods business in the March quarter.

Segment wise – India beverages revenue grew 3 per cent, India foods 20 per cent, US Coffee 3 per cent, International Tea 9 per cent, and non-branded business 4 per cent.

Growth businesses including Sampann, Soulfull, and Nourishco reported 40 per cent revenue growth in FY24.

ICICI Securities maintained a buy call on the stock with a target price of Rs 1,360, indicating an upside of 16 per cent.

"We reckon the stock trigger in FY25-26 is likely outperformance of growth businesses (which are gross margin accretive too). Post-acquisition of Capital Foods and Organic India, the salience of growth businesses is nearly 30 per cent of India branded sales," ICICI Securities said.

"It needs to execute the basics - derive synergies, distribution expansion, increase in through-put per store, etc. Starbucks plans to reach 1,000 outlets by FY28 (421 currently). We believe Tata Consumer has all the ingredients (resources, bandwidth, innovation pipeline, etc.) to achieve these targets," ICICI Securities said.

Tata Consumer has invested significantly in new products with 100 launched in the past five years. It has launched one new product every week in fiscal 2024. The revenue contribution of the new products launched in the past three years has increased from 0.8 per cent in FY20 to 5.1 per cent in FY24.

Nuvama Institutional Equities maintained its ‘buy’ call, with a target price of Rs 1,400 per share, implying a 19 per cent upside.

"Tata Consumer continues to drive growth via innovation, distribution expansion, and foray into new segments," the brokerage firm said.

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