KR Choksey has given Buy recommendation for Tata Consumer Products with a target price of Rs. 964 in its research report issued on Aug 12, 2022

KR Choksey’s research report on Tata Consumer Products

For Q1FY23, TATACONS reported revenue of INR 33,268 Mn, which is a growth of 10.6% YoY and 4.8% QoQ. The India Packaged Beverages business revenue declined by 4.0% YoY on a high base, while volumes increased by 1.0% YoY. The India Foods business revenue grew by 19.0% YoY, on an elevated base, while volumes declined by 3.0% YoY. The International Beverages revenue growth was 9.0% YoY. Tata Starbucks saw a revenue growth of 238.0% YoY, on a low base. EBITDA for the quarter was INR 4,573 Mn, which grew by 14.5% YoY and 2.9% QoQ. EBITDA margin of 13.7% for the quarter was an improvement of 47 bps YoY, though it contracted by 25 bps QoQ. Adjusted PAT was INR 2,794 Mn, which is a growth of 47.8% YoY and 18.3% QoQ. Adj PAT margin was at 8.4%, which grew by 211 bps YoY and 96 bps QoQ.

Outlook

We have valued TATACONS on a SOTP basis. For India Business, we apply an EV/EBITDA multiple of 40x to FY24E EBITDA; for International Business, we apply an EV/EBITDA multiple of 17x to FY24E EBITDA; and for Starbucks business, we apply an EV/Revenue multiple of 3x to FY24E Revenue. Accordingly, we maintain our target price of INR 964 per share (unchanged), an upside of 24.6% over the CMP. Accordingly, we reiterate a “BUY” rating on the shares of Tata Consumer Products Ltd.

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