Motilal Oswal has given Buy recommendation for Tata Consumer Products recommended buy rating on the stock with a target price of Rs 890 in its research repo with a target price of Rs. 890 in its research report issued on Sep 20, 2022
Motilal Oswal’s research report on Tata Consumer Products
The moderation in Tea prices led to an expansion in the standalone gross margin for TATACONS in the last five quarters. The average price of Jan’22 to Jun’22 declined by 11% YoY to INR147.6/kg. However, floods and extreme weather events impacted production in JunJul’22 and led to a surge in prices since Jul’22. Going forward, with an expected normalization in production, we expect Tea prices to remain stable or moderate from current levels, thereby improving its gross margin in FY23. In this note, we have analyzed Tea prices and production trends and its impact on TATACONS. Here are the key insights.
Outlook
We expect a sales/EBITDA/PAT CAGR of 11%/19%/31% over FY22-24. Factoring in an in line performance in 1QFY23, we maintain our FY23 and FY24 earnings estimate. We arrive at our SoTP-based TP of INR890 per share and maintain our Buy rating.