In its coverage initiation, Jefferies sees up to 40% upside in this Nifty multibagger

Jefferies initiating coverage on the stock earlier this week said the rally may not stop here. The broker set a bull case target of Rs 1,060 (translating into 40 per cent upside) and a base case target of Rs 960 (translating into 28 per cent upside) for the next 12 months.

“Tata Group’s consumer businesses’ consolidation has transformed Tata Consumer into a strong food and beverages play,” said Vivek Maheshwari, Equity Analyst at Jefferies. “India business (70 per cent of revenue) has a diverse mix of leading brands and high-growth segments, while slow-growing international business has improved profitability. Unique portfolio offers better margin visibility, a key differentiator versus peers.”

He forecasts FY22-25E EPS CAGR at 17 per cent.

According to the analyst, the biggest strength of the company is its salt and tea business. They form the bedrock of its India business and share similar traits, albeit with some differences. In salt, Tata Consumer leads the market with a 38 per cent share, and in packaged tea, it’s a strong number 2 with a 22 per cent share.

“Both categories, while high on penetration, have room for growth through formalisation, share gain, premiumization and expansion of distribution.

also has a small presence in packaged coffee,” said Maheshwari.

The company has a high growth portfolio comprising NourishCo (packaged water – Himalayan, Tata Water Plus), Sampann (spices and pulses), Soulful (breakfast), Tata Q (ready to eat) and Starbucks (coffee chain).

Besides generating 27 per cent of revenues, the international portfolio includes the global tea and coffee business, mainly in developed markets, with strong market shares in a handful of categories and geographies.

“We value the India business at 39x Jun-24E EV/Ebitda, largely in line with sector average and India accounts for 75 per cent of sum of the parts (SoTP) value. A sharp rise in input prices, consumption slowdown, and large-scale M&A are key risks to our positive view,” said Maheshwari.

He said in the base case, it expects an 11 per cent revenue CAGR in India branded business and a 4 per cent CAGR in the International business over FY22-25. In the bull case, India’s business grows faster at 13 per cent CAGR, led by a core portfolio and new growth initiatives.

Key catalyst that may impact the company’s growth and stock:

Upside catalysts


• Moderation in input costs, especially in salt

• Recovery in consumer demand, led by rural

• Entry into newer categories, both through organic and inorganic means

• Improved performance in the international business

• Further initiatives to restructure operations and drive synergies

Downside catalysts


• Elevated input inflation

• Weak consumer demand, which slows volume growth in tea and salt

• Execution risk in new growth categories

“Tata Consumer is on a multi-year transformation journey, expanding from being a tea & salt company to a broader FMCG franchise. With initial building blocks in distribution and portfolio expansion in-place, we expect TCPL to deliver strong growth over the medium term. We are largely in line with consensus on our EPS estimates,” added Maheshwari.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)