Tata Consumer Products: Maintain ‘buy’ with a revised TP of Rs 880

To strengthen its portfolio and stay aggressive on acquisitions.

Tata Client Merchandise (TCPL) is buying and selling close to its all-time excessive, having run up 32% since our initiation about 5 months in the past. On this report, we’re highlighting the takeaways from the corporate’s AGM, together with the give attention to increasing its on-line and offline distribution to drive the following leg of progress. Tea value correction, possible over the following two months, is a key variable. A possible YoY average correction in tea costs is probably going, however costs are prone to be increased than the extent two years in the past. The brand new management has infused vigour in execution. And, on the entire, we stay fairly constructive on the inventory over the medium to long run. Keep ‘purchase’ with a revised TP of Rs 880.

High eight takeaways:
Portfolio: To strengthen its portfolio and stay aggressive on acquisitions. Eight O’Clock Espresso: Set for India launch DTC mannequin (e-commerce) this week. Immunity well being merchandise: An space of focus; launches to comply with. Distribution: TCPL will guarantee availability regardless of the second wave. The corporate is taking steps to make merchandise out there all over the place and always. Non-core companies: The corporate would proceed to judge and exit them. Starbucks: Will proceed to increase it aggressively—39 shops opened in FY21. E-commerce and synergies: TCPL plans to leverage the Tata tremendous app to lift its e-commerce recreation. The Tata group has acquired a majority stake in on-line retailer BigBasket, which TCPL would leverage. Capex plan: Rs 3.5–4billion per yr. Outlook and valuation: Beneficial base widening; keep ‘purchase’ TCPL’s core companies — salt and tea — ought to feed its regular income momentum whereas new companies—pulses & spices—ought to present the income fillip. The corporate has sharpened the give attention to its key geographies and simplified its enterprise mannequin by exiting non-core markets and companies. Progress on Sampann stays a key driver for long-term progress, though Q4FY21 dissatisfied. Integration of the Meals & Beverage (F&B) enterprise has widened the direct protection of shops by 30% whereas integration of the F&B CFA community has led to value reductions. We retain ‘purchase/so’ with a revised TP of Rs 880 (earlier Rs 770) whereas rolling ahead the valuation to Dec-22E.
The inventory is buying and selling at 44.8x FY23E EPS.