Tata Consumer Products has outperformed most of its peers in the last one year as analysts remained upbeat on the FMCG firm owing to its strong balance sheet, potential revenue growth, and digital transformation drive.
The stock has risen 99 percent in the last one year, outperforming all FMCG stocks except Emami that gained over 170 percent during the period. In comparison, the benchmark Nifty has gained 59 percent and Nifty FMCG has added 26 percent during this period.
While Jubilant FoodWorks rose 95 percent, Varun Beverages, Marico, Godrej Consumer were up between 40 percent and 68 percent. Other largecaps like HUL, ITC, Nestle rose 10-15 percent in the last one year.
Tata Consumer's three-year returns have been 165 percent while the stock has surged 483 percent in the last five years. On a YTD basis, the stock is up 22.14 percent.
Brokerages believe that the company is likely to be benefitted from the bounceback of the economy on the back of factors like diversification of products, and robust balance sheet. In the last couple of years, in order to improve effectiveness, optimise costs and streamline operations, the company exited some of its loss-making businesses and restructured its international operations.
Recently, global brokerage house Goldman Sachs initiated coverage on the stock with a 'buy' rating. It sees further upside in the stock from its asset-light strategy, its JV with Starbucks, as well as potential deployment of Rs 2,700 crore in net cash for inorganic opportunities.
"Tata Consumer is transforming to become a key player in India’s large packaged food segment. It is poised to drive revenue growth using its portfolio advantage, improving distribution network and strong balance sheet to grow sales at a 12 percent CAGR over FY21-26E. The expanding portfolio and distribution network should also allow it to drive operating cost optimization and grow its domestic EBIT by 4.5x by FY30E as it launches/acquires more
products to piggyback on its distribution network," said Goldman Sachs.
According to Motilal Oswal, the India Food business comprising Tata Salt and Tata Sampan is expected to drive a major shift to the organised from the unorganised sector. The segment should drive the next phase of the firm's growth.
For the March quarter, the company reported a consolidated net profit of Rs 53.9 crore as against a net loss of Rs 76.5 crore in the year-ago quarter. Its consolidated revenue from operations for the quarter surged 26 percent YoY to Rs 3,037.2 crore
The consolidated operating profits, however, were down 4.1 percent at Rs 234.33 crore in Q4 on account of raw material costs and advertisement expenses rising.