Tata Consumer Products Ltd. share price target

Despite the volatile macro environment and geopolitical unrest, Tata Consumer Products (TATACONS) delivered a well-rounded performance across key metrics with double-digit revenue growth and an EPS growth of 28% in FY23. The organized Indian food and beverage market is expected to grow at 10-15% over the next 5 years.

Multiple transitory issues impacted TCPL’s FY23. We note (1) India Tea (Late winter, softness in some of the markets, rural slowdown), (2) Salt (Steep inflation in input prices) and International business (Currency headwinds and inflationary pressures) were forced to choose profitability sacrificing volumes in FY23.

For Q3FY23, TATACONS reported revenue of INR 34,746 mn (+8.3% YoY/ +3.3%QoQ). Overall, India business revenues grew by 7.7% YoY. Revenue for the India Beverages business declined by 4.7% YoY with a volume decline of 5.0%, impacted by pricing corrections, rural demand pressures, and the late onset of winter.

Salt revenues grew +27% (volumes +4%) in 3Q. 90bps market share gains is good. We believe revival of Salt business which enjoys strong competitive advantages and higher margins than TCPL overall is DCF accretive.

For Q2FY23, TATACONS reported revenue of INR 33,631 mn (+10.9% YoY/ +1.1% QoQ). For H1FY23, the revenue was INR 66,899 mn (+10.7% YoY).

India business reported EBIT margin of 14.2% in Q2FY23 (+150 bps QoQ); however, Tea and Foods volumes were flat (-1% and 0% YoY, respectively). Tea market share (value) declined 20bps YoY.