4 May 2022 , 12:12 AM
Result date: 4th May, 2022
Recommendation: Add
Target price: Rs840
Tata Consumer Product is likely to report 3.8% year-on-year growth in consolidated sales for the March 2022 quarter. The company’s domestic tea business could reflect effects of high volume base of the year-ago quarter as well as deflation in tea prices in recent times. This business could post flattish volumes and value decline of ~5%. Its salt business could benefit from the full effect of the price increases taken in the December 2021 quarter. The company’s international beverage business (including Eight O’ Clock) could post flattish revenue.
On the back of deflating tea prices, Tata Consumer Products would be the only FMCG company in IIFL Capital Services’ universe to witness sharp expansion in gross margin during the quarter. Margins of international beverage business though are likely to moderate sequentially. Low base of the year-ago quarter could compensate for increasing ad spends and drive a 45% growth in EBITDA. EBITDA margin is seen at 13.8%.
While India-tea margins are expected to be stable, India-food margins are expected to improve, driven by price increases taken in the previous quarter, although cost inflation has also gone up.
Important management insights to watch out for:
· Outlook on demand across all segments and markets
· Trends in input cost inflation, pricing action planned and margin levers
Rs Million | March 2022 estimates | YoY change |
Revenue | 31,520 | 3.8% |
EBITDA | 4,361 | 45.3% |
Profit After Tax | 2,353 | 142.7% |
Source: IIFL Research
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