Tata Consumer stock gains after Q2 results beat street, growth momentum intact

Tata Consumer stock rose one percent on November 1 after the FMCG player reported a consolidated net profit of Rs 359.18 crore for the quarter ended September, beating the street’s expectations as price hikes boosted margins.

Morgan Stanley maintained its ‘overweight’ call on Tata Consumer stock, with a target price of Rs 933 apiece, as the results were better than its estimates. This is a 3.7 percent upside from the previous closing price of Rs 900.

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Tata Consumer net profit grew 1.18 percent year-on-year, from Rs 354.98 crore in the same quarter of the previous financial year. The total revenue clocked in at Rs 3,733.78 crore, higher by 11.02 percent from Rs 3,363.05 crore in the corresponding quarter in a year-ago.

Gross margins expanded by 76 bps year-on-year to come in at 42.5 percent. The India business grew 11 percent while the international business saw a growth of 13 percent year-on-year.

As of 9.20 a.m., shares of the company were trading at Rs 903.65 on the NSE, higher by 0.36 percent from the previous session’s closing price.

During the quarter, Tata Consumer Products witnessed a marginal dip in market share in salt of 44 bps and lost market share in tea (volume dip of 37 bps and value dip of 95 bps). Tata Consumer’s market share loss in salt and tea pose a negative for the company’s outlook, said Morgan Stanley.

Momentum continued in ‘India Growth’ businesses – Sampann, Soulfull, NourishCo; the businesses grew 39 percent and accounted for 18 percent of the India business during the quarter, said the company in a filing with the exchanges. Morgan Stanley added that the growth trend spanning across ‘growth’ businesses is a positive indicator for the FMCG firm.

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“Overall, the worst seems to be behind the India tea business and international margins,” said Nuvama Institutional Equities, with a ‘buy’ call and target price of Rs 1,035 apiece.

Tata Consumer Products also announced the firm’s amalgamation with subsidiaries NourishCo Beverages and SmartFoodz with the parent entity, which is expected to result in synergies and savings.

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