Formerly, known as Tata Global Beverages, Tata Consumer is currently undergoing a transformation to become a multi-category FMCG company from a food and beverage (F&B) company which analysts at
believe will be a multi-year journey. The global brokerage eyes a consolidated revenue CAGR of FY21F-23 of 8 per cent and operating margin expansion of 200 basis points (bps) as it initiated a 'BUY' coverage on the stock with a target price of Rs 750 per share.
bullish on the stock:
Core business gains strong impetus
Tata Consumer plans to double its direct reach to 1 million outlets over 12 months, which Nomura
believes will meaningfully drive volumes and give a strong impetus to its core tea and salt portfolio, resulting in better growth than peers. It sees India beverages and salts FY21F-23 revenue CAGR of 8.5 per cent and 10, respectively.
"We believe TCPL, with its strong positions in tea (no.1 in India by volume) and salt (65 per cent share in the branded segment) will benefit disproportionately from a shift from unorganised to branded post-pandemic," said Mihir P. Shah in a note co-authored by Abhishek Mathur.
The launch of premium value-added salts, which could aid higher margins, also provides Tata Consumer an option value on premiumisation, they added.
New expansion plans
Tata Consumer's focus on tapping the unorganised segment in the pulses and spices market via its 'Sampann' brand gives the company a significant headroom for growth, said Nomura. It forecasts an FY21F-23F revenue CAGR of 38 per cent for Sampann.
Besides, the company is foraying into higher-margin niche packaged foods’ categories as a natural progression to leverage its strong sourcing, distribution and brand. This, Nomura says, can drive organic sales at 40 per cent CAGR over FY21F-23F for its snacks, breakfast and cereals business.
Nomura expects international business revenue CAGR of 3 per cent over FY21F-23F, as it is largely in developed countries and mature categories. This would also sustain the company's margin and cash-generation trajectory, the say. While the contribution from these new launches is still low, Nomura expects it to increase gradually over the medium term.
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