Tata Consumer Products - Q4FY21 First Cut - ICICI Direct

(CMP - Rs. 653, MCap - Rs. 59,813 crore)

Tata Consumer Products' Q4FY21 results were in line with our estimates on revenue front however significantly below our estimates on margins & earnings front.

Q4FY21 Earnings Summary

- Revenue grew by 26.3% to Rs. 3037.2 crore (I-direct estimate : Rs. 3004.5 crore) led by robust 59.6% growth in India beverage segment & 22.4% growth in consumer foods business (Salt, Pulses). International beverages sales remain flat during the quarter. Non branded business witnessed a growth of 28.8%. With the significant increase (~70%) in tea procurement prices last year, the company took aggressive price hikes to pass on the increase in the cost

- The sharp increase in Indian tea prices led to the 623 bps contraction in gross margins. Though, the company was able to save 73 bps in employee spends, 42 bps In marketing spends & 214 bps in overhead spends, it was not enough off-set the cost inflation. Operating profit de-grew by 2.6% to Rs. 300.2 crore. Operating profit margins 290 bps to 9.9% in Q4FY21

- The company incurred Rs. 63.9 crore expense on account of loss from disposal of overseas business entity. Moreover, loss from associates was Rs. 59 crore in Q4. With lower EBITDA margins & extraordinary senses, Net profit stands at Rs. 74 crore as against a loss of Rs. 133 crore

The sharp increase in tea procurement prices led to the significant contraction in gross margins. Though, the company has taken price increases & cut overhead expense to safeguard operating margins, it was not enough. Tea, Pulses & Salt categories have continue to see the consumption shift from loose to packaged foods, which is also resulting in strong volume growth over the last one year. In second wave of pandemic, the essentials categories would continue to see strong growth in future. However, tea prices have still remains at an elevated levels which would continue to pressurise margins in medium term. We need to see the progress of monsoon in north eastern region to access price movement in the next three to four months.

We will be coming out with a detailed update after the conference call with the management.

Shares of Tata Consumer Products Limited was last trading in BSE at Rs.653.4 as compared to the previous close of Rs. 649.4. The total number of shares traded during the day was 376066 in over 12085 trades.

The stock hit an intraday high of Rs. 655 and intraday low of 638.15. The net turnover during the day was Rs. 242303524.

Source : Equity Bulls

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