Tata Consumer Products, which sells tea, salt, spices and other consumer products, has delivered a whopping 90 percent returns to its investors over the past two years, despite rising inflation and a pandemic that has threatened growth. The FY22 annual report states that the FMCG company is focusing on six strategic initiatives identified by management to strengthen its foundation as a strong consumer products company.
“Tata Consumer’s holistic strategy focuses on transformation by strengthening and accelerating its core businesses, exploring new opportunities, unlocking synergies, digitizing its supply chain, expanding its product portfolio and innovation,” emphasizes domestic brokerage and research firm Motilal Oswal.
The company is also strengthening its focus on premiumization and health and wellness products, anchoring sustainability and expanding its sales and distribution infrastructure, supply chain and capacity building into a multi-category FMCG player.
“Tata Consumer Products builds Tata Sampann, their Pantry category. This should grow at high double digits by capturing market share from disorganized players through increased distribution reach and product launches,” it added.
Tata Consumer Products: History of Stock Prices
Tata Consumer Products, part of the Indian conglomerate Tata Group, is a fast-moving consumer goods company (FMCG). Tata Group stock has fallen more than 2 percent so far in 2022 (YTD), while it has fallen by about 3 percent in a year. However, the company has nearly doubled investor money in the past two years and has achieved nearly 385 percent returns over the past 5 years. The stock hit a 52-week low at Rs 650.20/share on March 7, 2022 and a 52-week high at Rs 889/share.
Tata Consumer Products: What Analysts Expect?
The brokerage expects a revenue/EBITDA/PAT CAGR of 11 percent/19 percent/29 percent from FY22-24 and has arrived at an FY24E SoTP-based target price of Rs 900 per share, indicating a potential upside of about 25 percent. of the current stock level. It maintains its buy rating on Tata Consumer stock.
“Unlocking sales and distribution synergies from group company mergers is beginning to pay off. This is evidenced by market share gains in tea (+100 bps yoy) and salt (+400 bps yoy) as of March 22, supported by an increase in numerical distribution. The company is in the process of establishing a strong S&D channel, which will be an important growth engine,” said Motilal Oswal.
In FY22, Tata Consumer expanded into new target markets, launched regionally-focused packages, unveiled high-impact campaigns across multiple platforms, and drove premiumization.
Jefferies who initiated coverage for the stock earlier this month said the rally may not stop here. The broker set a bull case target of Rs 1,060 and a base case target of Rs 960 for the next 12 months.
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