Report
Sumant Kumar
EUR 120.00 For Business Accounts Only

MOSL: TATA CONSUMER PRODUCTS (Buy)-Gross margin improvement in sight; In line operating performance

TATA CONSUMER PRODUCTS: Gross margin improvement in sight; In line operating performance   

(TATACONS IN, Mkt Cap USD9.4b, CMP INR760, TP INR850, 12% Upside, Buy)

 

  • Higher Tea prices impacted standalone gross margin, and higher A&P investments affected consolidated EBITDA margin. However, the impact of Tea cost inflation is subsiding as gross margin improved QoQ. The management expects the same to reach FY20 levels in one or two quarters.
  • Volume growth in the India Foods business rose 17% YoY, whereas revenue grew 20% in the Salt business on the back of market share gains. However, the India Packaged Beverages business recorded 3% YoY volume growth, due to disruption caused by the second COVID wave. Tata Sampann's portfolio grew 12% YoY due to pantry loading in the base quarter (growth of over 50% in the base quarter).
  • We lower our FY22E/FY23E earnings estimates by 3%/2%, factoring in its 1QFY22 performance, and arrive at our SoTP-based TP of INR850/share. We maintain our Buy rating.
Underlying
Tata Consumer Products Limited

Tata Tea is a holding company based in India. Through its subsidiaries, Co. is engaged in the cultivation, manufacture, sale and export of tea, instant tea, coffee, instant coffee, pepper and in investment holding operations. Co. has five major brands in the Indian market - Tata Tea, Tetley, Kanan Devan, Chakra Gold and Gemini -- catering to all major consumer segments for tea. Co. has a 100% export-oriented unit (KOSHER & HACCP certified) manufacturing Instant Tea in Munnar, Kerala. The Tata Tea and Tetley portfolios of branded offerings caters specifically to the Australian, Middle East, West Asia, North Africa, Poland, Russia and Kazakhstan markets.

Provider
Motilal Oswal
Motilal Oswal

​Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance. 

Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.

Analysts
Sumant Kumar

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