BUY (Target Rs490, Upside 9.4%)
Strong revenue/EBITDA/PAT growth of 13%/38%/42% respectively led by strong growth in India Foods and International Beverages. Despite the production and supply chain disruptions in April, superb on-ground execution helped further by pantry stocking led to 8% growth in India tea, 19% in India foods (11% in salt and >50% in pulses/spices), 15% in international beverages (13% in tea and 37% in EOC coffee) and 12% in Tata Coffee. Strong 310bps EBITDA margin improvement to 17.9% led by better realizations, lower trade spends, better product and channel mix, utilization of low priced RM inventory and lower discretionary expenditure across key cost heads. Management highlighted some tapering off in the demand momentum and also the margin risks on account of a 50% rise in India tea prices; integration between foods and beverages business should complete by end-CY20 with expected synergy benefits of 1.5%-2% over 18-24 months and a 100bps reduction in distribution costs post completion of supply chain initiatives. Results were a significant beat on our and consensus estimates with more than expected surge in demand due to pantry stocking across markets coupled with strong execution and lesser promotion and other spends.
We retain our BUY rating despite the recent up move as we believe it is a solid medium to long term story with improving visibility of higher growth rates and better execution coupled with multiple margin levers driving higher return ratios. We increase our SOTP-based TP to Rs 490 from Rs 460 earlier given a 13% and 9% upgrade to our EPS estimates for FY21 and FY22 respectively, implying 44x P/E.
Shares of Tata Consumer Products Limited was last trading in BSE at Rs.518.4 as compared to the previous close of Rs. 484.75. The total number of shares traded during the day was 1330769 in over 20016 trades.
The stock hit an intraday high of Rs. 530.1 and intraday low of 482.75. The net turnover during the day was Rs. 680961379.