Tata Consumer Products Ltd. share price target

TCPL’s Q3FY25 numbers are not exactly comparable on y-o-y basis due to consolidation of acquired businesses - Capital Foods and Organic India. TCPL’s Q3FY25 performance was impacted by sharp increase in the tea prices (up by 20-40%) which led to 234 bps y-o-y decline in the consolidated OPM to 12.7%.

? For Q3FY25, the revenue increased 16.8% YoY (+5.4% QoQ) to INR 44,436 Mn, beating our estimates by 2.1%.
? EBITDA declined by 1.3% YoY (-9.8% QoQ) to INR 5,647 Mn, missing our estimate mainly due to higher than estimated operating expenses. EBITDA margin contracted by 234bps YoY (-215bps QoQ) to 12.7%, missing our estimate by 184bps.

Tea inflation recovery prospects have improved as higher pricing has come through earlier than expected

Richly valued, even conside ring an optimistic outlook

Tata Consumer share price corrected ~7% post 2QFY25 result on Tea inflation and sales challenges in NourishCo. Correction is overdone

In Q2FY25 TATACONS’S India Foods, International, and non-branded segments showed healthy performance, while India Beverages faced a weaker quarter.
Elevated tea prices prompted staggered price increases in the Indian tea business.

Tata Consumer Products (TATACONS) reported 8% YoY EBIT growth in 2QFY25 on the back of a strong performance in its international branded beverage segment (EBIT up 74% YoY) and non-branded business (EBIT up 86% YoY).

Compared to consensus, sales came in 3% lower while EBITDA was in line

Tata Consumer Product Ltd’s (TCPL’s) Q2FY2025 performance was broadly in line with expectations with revenues growing by ~13% y-o-y (organic growth at 5%) and OPM rising ~50 bps y-o-y to 14.9%.

Medium- to long-term growth prospects remain intact with TCPL targeting double-digit topline growth driven by growth businesses

Our analysis of Tata Starbucks financials over FY14-24 indicate It had revenue CAGR of 29% over FY14-24 and store count CAGR of 26%. The revenue/store has remained flat at ~INR 35mn.

Q1FY25 consolidated revenue stood at INR 43,521 Mn, which grew by 16.3% YoY/ +10.8% QoQ, (in line with estimates).
EBITDA grew to INR 6,674 Mn, up 22.4% YoY/ (+6.0% QoQ), missing our estimates by 2.1%. EBITDA margin stood at 15.3% (+77 bps YoY/ -70 bps QoQ) was lower than our estimates, due to higher-than-expected operating expenses such as other expenses.

TATACONS reported sales and EBITDA beat on improved margins in the unbranded business and MA

Tata Consumer Products (TATACONS) reported a healthy operating performance in 1QFY25. EBIT growth of 12% YoY was led by a strong performance in international branded beverage segment.

Tata Consumer Products Ltd’ (TCPL’s) operating performance was good with revenues and operating profit growing by 16% and 22% y-o-y respectively; higher interest cost kept adjusted PAT flat at Rs. 368 crore.

For Q4FY24, TATACONS’ revenue was a miss due to lower growth in international tea and India beverages. EBITDA margin performance ((+189 bps YoY/ +99 bps QoQ) was the bright star aided by improved international profitability.

TCPL’s Q4FY24 was in line with our estimates. We reckon, stock trigger in FY25-26 is likely outperformance of growth businesses (which are gross margin accretive too).

For Q3FY24, TATACONS’ revenue grew by 9.5% YoY/ 1.9% QoQ to INR 38,039 Mn, driven by strong growth across India and International business. India beverages saw a volume/ value growth of 2.0%/ 8.0% YoY, respectively driven by volume growth and premiumization in tea and strong revenue growth in NourishCo (+34.0% YoY).