Tata Consumer Products (TCPL) is trading close to its all-time higher, getting run up 32% considering the fact that our initiation about 5 months ago. In this report, we are highlighting the takeaways from the company’s AGM, such as the focus on expanding its on-line and offline distribution to drive the next leg of development. Tea price tag correction, most likely more than the next two months, is a essential variable. A prospective YoY moderate correction in tea costs is most likely, but costs are most likely to be larger than the level two years ago. The new leadership has infused vigour in execution. And, on the entire, we stay rather positive on the stock more than the medium to extended term. Maintain ‘buy’ with a revised TP of Rs 880.
Top eight takeaways:
Portfolio: To strengthen its portfolio and stay aggressive on acquisitions. Eight O’Clock Coffee: Set for India launch DTC model (e-commerce) this week. Immunity well being solutions: An location of focus launches to stick to. Distribution: TCPL will guarantee availability regardless of the second wave. The business is taking measures to make solutions offered everywhere and at all occasions. Non-core firms: The business would continue to evaluate and exit them. Starbucks: Will continue to expand it aggressively—39 shops opened in FY21. E-commerce and synergies: TCPL plans to leverage the Tata super app to raise its e-commerce game. The Tata group has acquired a majority stake in on-line retailer BigBasket, which TCPL would leverage. Capex strategy: Rs 3.5–4billion per year. Outlook and valuation: Favourable base widening sustain ‘buy’ TCPL’s core firms — salt and tea — ought to feed its steady income momentum whilst new businesses—pulses & spices—should provide the income fillip. The business has sharpened the focus on its essential geographies and simplified its company model by exiting non-core markets and firms. Progress on Sampann remains a essential driver for extended-term development, while Q4FY21 disappointed. Integration of the Food & Beverage (F&B) company has widened the direct coverage of outlets by 30% whilst integration of the F&B CFA network has led to price reductions. We retain ‘buy/so’ with a revised TP of Rs 880 (earlier Rs 770) whilst rolling forward the valuation to Dec-22E.
The stock is trading at 44.8x FY23E EPS.