Tata Consumer Products shares drop 2% post Q1; here’s why
Shares of Tata Consumer Products declined over 2% on Wednesday after the owner of Tetley tea and Ching's Secret noodles brands released its June quarter earnings report. The FMCG stock has been under stress for three sessions and lost nearly 4% during the same period.
Continuing its losing streak, Tata Consumer Products shares fell as much as 2.3% to ₹1,166.30, while the market capitalisation slipped to ₹1.16 lakh crore. Early today, the Tata Group stock opened marginally higher at ₹1,194.75 against the previous closing price of ₹1,193.85 on the BSE.
The shares of Tata Consumer Products touched its 52-week high of ₹1,254.36 on March 7, 2024, and a 52-week low of ₹817.32 on August 28, 2023. The stock has given 37% return to its shareholders in the last one year; over 5% in six months; and nearly 8% in a month. In the calendar year 2024, the FMCG heavyweight has risen over 9%.
For the April-June quarter of FY25, Tata Consumer Products reported a consolidated net profit of ₹290 crore (attributable to owners), down 8.5% from ₹317 crore in the year-ago period, as strong summer in India reduced consumption of beverages such as tea and coffee. Revenue grew 16% to ₹4,352 crore in Q1 FY25 as compared to ₹3,741 crore in the same period last year EBITDA for the quarter jumped 23% to ₹671 crore, with a margin expansion of 80 bps to 15.4%.
As per the report, Indian branded business grew by 14% YoY to ₹2,820 crore, led by revenue growth of 5% and 25% YoY in beverage and food business, respectively, to ₹1,520 crore and ₹1,290 crore. Volumes in India packaged beverage business stood flat YoY, while volumes in the foods business grew 10% YoY (excluding capital foods).
International branded beverages revenue grew 17% YoY to ₹1,050 crore, with EBIT growth of 52% YoY to ₹180 crore. Non-branded business revenue increased 33% YoY to ₹500 crore, while EBIT jumped 92% YoY to ₹96.1 crore due to higher coffee prices.
Post Q1, Nuvama retained ‘Buy’ call on the stock with a revised target price of ₹1,390 from ₹1,360 earlier. The brokerage has cut FY25E and FY26E earnings per share (EPS) by 4% each, citing concerns over Inflationary tea and coffee cost.
Motilal Oswal has also reiterated ‘Buy’ on Tata Consumer Products with a target price of ₹1,380. “We expect Tata Consumer to clock a revenue/EBITDA/PAT CAGR of 12%/18%/20% during FY24-26. We broadly maintain our FY25/FY26 EBITDA estimates,” it says in a note.
The brokerage says that Tata Consumer's holistic strategy is aimed at strengthening and accelerating its core business; exploring new opportunities; unlocking synergies; digitising the supply chain; and expanding its product portfolio and innovation. It also focuses on enhancing its focus on premiumisation and health & wellness products; embedding sustainability; and expanding its sales and distribution infrastructure, supply chain, and capability building toward being a multicategory FMCG player.
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