Tata Consumer shares rally over 4% after Q2 results. Why brokerages remain bullish despite target price cu
Tata Consumer Products reported 16% year-on-year profit growth in Q2FY27, while brokerages retained positive ratings but cut target prices amid inflationary pressures. Jefferies, Nuvama, Elara Capital and Systematix see varying upside potential in the stock.
Shares of Tata Consumer Products gained up to 4.5% to their day's high of Rs 979 on the BSE on Tuesday after the FMCG major released its results for the July-September quarter of FY27, reporting a 16% year-on-year growth in consolidated net profit to Rs 469 crore despite higher costs and weak tea demand.on-year growth in consolidated net profit to Rs 469 crore despite higher costs and weak tea demand.Tata Consumer Products said its revenue from operations stood at Rs 5,661 crore for the second quarter of FY27, up 14% from Rs 4,966 crore reported in the corresponding quarter of the previous financial year.
The firm’s consolidated earnings before interest, taxes, depreciation and amortisation (EBITDA) meanwhile increased 18% to Rs 794 crore during the quarter.“We delivered our second consecutive quarter of double-digit revenue growth in FY27, backed by strong underlying volume growth in India business. This volume-led performance, together with disciplined execution, drove 18% EBITDA growth,” said Sunil D’Souza, managing director and chief executive officer of Tata Consumer Products.
The latest target price implies around 33.5% upside potential from the stock’s previous closing price.Live EventsThe international brokerage noted that Tata Consumer Products remains a key beneficiary of the rapid adoption of quick commerce, especially in the growth portfolio, which contributed around 38% of the India business in the second quarter, with this share set to reach around 50% in three years.Overall, the FMCG major’s Q2 performance was ahead of estimates despite inflationary pressures in tea and salt segments, but product price hikes should help in future, according to Jefferies.
International business saw a revenue decline but saw margin expansion.Nuvama on Tata Consumer Products share priceNuvama Institutional Equities maintained its ‘Buy’ rating on the shares of Tata Consumer Products, but reduced its target price to Rs 1,275 apiece, implying over 36% upside potential from the stock’s previous closing price. The brokerage noted that the company’s Q2 earnings print was in line with estimates.The brokerages reduced the target price to factor in the EPS estimate cuts and inflationary pressures in the economy.Elara Capital on Tata Consumer Products share priceElara Capital reiterated its ‘Accumulate’ call on shares of Tata Consumer Products but reduced its target price to Rs 1,080 apiece from Rs 1,290.
The latest target price implies more than 15% upside potential.The brokerage noted that the company’s 14% revenue growth was in line with estimates, according to ET Now. It added that the valuation contribution from Tata Starbucks JV was revised to Rs 40 per share from Rs 54.Systematix on Tata Consumer Products share priceSystematix Institutional Equities upgraded its rating on the shares of Tata Consumer Products to ‘Buy’ but reduced its target price to Rs 1,185 apiece from Rs 1,245 apiece.
It noted that the company delivered the tenth straight quarter of double-digit revenue growth.Tata Consumer Products is consistently generating strong double-digit topline growth across most segments (excluding India tea) for the past five-six quarters now, led by sturdy volume growth, the domestic brokerage noted. In addition, the portfolio is pivoting towards higher-growth businesses, like Sampann, Soulfull, RTD, which are also now starting to assert themselves on margins, it added.While this transformation could likely be gradual, it reduces dependence on the seasonal tea business, Systematix said.
“We also like the near- to medium-term margin construct with product mix enrichment accruing from premium variants of pulses, dry fruits, breakfast cereals, snacks (poha, makhana), RTD beverages and cold-pressed oils. The recent sharp stock price correction (-19% over the past 6 months) provides downside comfort,” it added.In the longer term, shares of the FMCG major have delivered positive returns of a little over 6% in three years and 15% in five years.
The company has a market capitalisation of more than Rs 92,685 crore.Disclaimer: This article has been written by Debaroti Adhikary, who is not a SEBI-registered Research Analyst or an Investment Adviser. Debaroti Adhikary and his/her ‘relative(s)’ (as defined under Section 2(77) of the Companies Act, 2013) do not hold any financial interest in the companies mentioned in this article as of the date of publication.
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