Tata Consumer Product (TCPL) reported robust sales growth of 18.5% led by India beverage business growth of 32% and food business growth of 13%. International tea business (Tetley, Teapigs, Good Earth), US coffee (Eight O'clock) grew 1%, 4%, respectively in constant currency (CC). The strong growth in India beverage business was led by 11% volume growth & price hikes in tea segment by ~15%. Food business volume growth was 6%. International business volumes were flat & US coffee volumes fell 3%. The dismal volumes in International business was impacted by pantry storing in Q1. Overall volume growth was ~6% (our estimate). Gross margins fell 269 bps with tea prices rising sharply by ~80% given tea crop was negatively impacted by lockdown in April & floods in July. However, cost rationalisation measures led to saving in employee spends to sales (down 112 bps), other overhead to sales (down 158 bps). Further, 95 bps reduction in marketing spends led to operating profit growth of 26.9% to Rs. 399.6 crore & operating margin expansion of 95 bps to 14.4%. The higher operating profit, increased profit from associates resulted in net profit growth of 31.4% to Rs. 273.2 crore.
Valuation & Outlook
With the merger of the food business, TCPL's product portfolio has presence of high growing categories like pulses, spices supported by consumption shift from loose to packaged food. Moreover, tailwinds of at-home consumption would further aid growth. We expect revenues & earnings CAGR of 9.6% & 29.5%, respectively, in FY20-23E. We value TCPL at 40x FY23E earnings with revised target price of Rs. 605/share and BUY rating.
For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_TataConsumerProduct_Q2FY21.pdf
Shares of Tata Consumer Products Limited was last trading in BSE at Rs.516.3 as compared to the previous close of Rs. 513.25. The total number of shares traded during the day was 57188 in over 3005 trades.
The stock hit an intraday high of Rs. 519 and intraday low of 515. The net turnover during the day was Rs. 29556024.