Tata Consumer rating: Retain ‘add’ with target price at Rs 480

TCPL reported revenue, Ebitda and PAT growth of 13.4%, 37.6% and 42.1%, respectively.

India Branded tea beverages and Foods volumes grew 4% and 8%, respectively in 1Q, a top decile performance in consumer staples. Drivers are focus on distribution expansion and increase in direct reach, higher in-home consumption of beverages leading to market share gains for Tata Tea and rising acceptance of packaged food brands like Tata Sampann. There is gradual improvement in Starbucks business activities with 60% stores open now. We stay believers. Retain ‘add’ rating with SoTP based target price of Rs 480.

TCPL reported revenue, Ebitda and PAT growth of 13.4%, 37.6% and 42.1%, respectively. Constant currency growth was 11%. Segment-wise revenue growth rates, India Beverages 11%, India Foods 18.9% and International Beverages 15%. India Branded tea beverages and Foods reported volume growth of 4% and 8%, respectively. Stocking due to Covid resulted in strong revenue growth of International Beverages. Gross and Ebitda margin improved 180 bps and 310 bps due to higher revenues of branded products and deflation in commodity prices. Standalone revenues and PAT were up 9.7% and 55.8%, respectively.

We expect steady improvement in Ebitda margin in FY21-22 due to rising share of higher margin branded products in India, revenue and cost synergy benefits, savings in distribution and cost saving initiatives and lower input prices.
International Beverages reported 15% revenue growth partially led by up-stocking by consumers due to Covid. Eight O’clock coffee reported revenue growth of 26.4%, YoY. Tetley reported revenue growth of c.7%. International business reported Ebit margin expansion of 400 bps due to lower input prices and operating leverage. While Starbucks operations continue to be impacted due to lockdown, 60% of 186 stores have reopened now.