Q3FY21 Result Update - Tata Consumer Products - ICICI Direct

Tata Consumer Products reported strong revenue growth of 23.1% led by robust growth in India beverage & India foods segment. Overall volume growth was ~7%. The sharp increase (70-80%) in tea procurement prices led the company to take aggressive price hikes in tea. In turn, this resulted in 43% growth in the India beverages segment. Still price hikes were insufficient to pass on the entire commodity price rise, which impacted India beverage segment margin by 839 bps. India food business grew 19% led by 12% volume growth. Tata Sampann & Tata Salt Lite saw 40% & 110% sales growth in Q3. International tea business & US coffee business revenue grew 7% & 6%, respectively, led by similar volumes. Gross margins contracted 574 bps but savings in employee spends, marketing spends & other overhead of 94 bps, 125 bps & 256 bps, respectively, restricted operating margins contraction by 99 bps. Operating profit increased 13.6% to Rs. 361.3 crore. PAT increased 28.6% to Rs. 237.4 crore led by higher operating profit & decline in tax provisioning. The company acquired 100% stake in Kottaram Agro Foods (brand Soulful) for a consideration of Rs. 156 crore.

Valuation & Outlook

The acceleration of unbranded to branded consumption shift post pandemic has worked well for packaged foods companies. We believe these trends would benefit TCPL in the medium term. We estimate 26.6% CAGR earnings growth in FY20-23E. We value TCPL at 50x FY23E earnings with revised target price of Rs. 700/share (earlier Rs. 605) & maintain BUY recommendation.

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_TataConsumerProduct_Q3FY21.pdf

Shares of Tata Consumer Products Limited was last trading in BSE at Rs.579.7 as compared to the previous close of Rs. 575.55. The total number of shares traded during the day was 595748 in over 13729 trades.

The stock hit an intraday high of Rs. 597.9 and intraday low of 571.3. The net turnover during the day was Rs. 349354668.

Source : Equity Bulls

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