Tata Consumer zooms as Citi begins coverage with ‘buy’ rating, sees 21% upside

Brokerage firm Citi has initiated coverage on FMCG major Tata Consumer Products with a bullish price target of Rs 1,020, implying an upside potential of 21 percent from Friday’s closing price.

The robust outlook from Citi also makes it the first brokerage out of the total 25  covering the scrip to see a potential in Tata Consumer shares to top the Rs 1,000 mark.

Category formalisation, market share gains from local players, new products and expanded distribution, major factors anticipated to fuel the next leg of growth for the FMCG company are the reasons attributed by Citi for the bullish call.

At 1.05pm, shares of Tata Consumer Products were trading 1.73 percent at Rs 855.10 on the National Stock Exchange. Trading volumes were also high as 22 lakh shares changed hands on the exchanges as against the one-month daily traded average of 18 lakh shares.

Additionally, the brokerage firm also foresees the company strengthening its position in its core categories, with its contribution rising to 27 percent of overall sales, compared to the previous figure of 15 percent.

According to Citi’s projections for FY23-26, Tata Consumer is likely to achieve a compounded annual growth rate (CAGR) of 12 percent in revenue, 17 percent in operating profit (EBITDA), and 22 percent in net profit.

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There are several risks as well that may hinder the growth prospects for the FMCG major. A potential delay in demand recovery due to El Niño conditions, volatility in commodity costs and foreign exchange rates, and increased competitive intensity, are some of those factors as noted by Citi.

Another brokerage house, Nuvama Institutional Equities, also chose Tata Consumer Products as its top pick within the FMCG basket while raising its target price for the stock by 3.3 percent to Rs 925.

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