This multibagger Tata stock can rise over 21%, says ICICI Securities

Expecting Tata Consumer Products (TCPL) to report revenue and PAT CAGR of 12.1% and 18.1%, respectively, over FY22-24E, the brokerage firm ICICI Securities is maintaining a buy call on TCPL with a target price of Rs 925. The brokerage sees a potential upside of over 21% in the stock.

TCPL reported consolidated revenue and EBITDA growth of 10.9% and 5% YoY, respectively. However, recurring PAT declined 20.5% YoY. Constant currency growth was 10%. The gross and EBITDA margin of the company declined 101bps and 73bps. While standalone revenues, EBITDA and PAT were up 7.2%, 25.1% and 20.9% YoY, respectively.

“India business reported an EBIT margin of 14.2% in Q2FY23 (+150 bps QoQ), however, tea and foods volumes were flat (-1% and 0% YoY, respectively). Tea market share (value) declined 20 bps YoY. We believe the strategy to focus on margins in the short term instead of volumes/ market shares may protect earnings in the short term, but it may impact DCF value. International business EBIT declined 46% YoY due to inflationary pressures as well as GBP depreciation,” ICICI Securities said in a report.

“We believe both the key segments (India and International) are likely to see headwinds in the near term due to steep volatility in input prices, currency depreciation and likely recession in international markets. We model the consolidation phase to continue even in H2FY23,” said the brokerage.

The EBIT margin of the international business declined to 7.1% in Q2FY23 from 14% in Q2FY22 due to GBP depreciation as well as steep inflationary pressures. The brokerage firm further believes currency depreciation in Oct’22 as well as high inflation and likely recession in international markets indicate the weaker perfor

Starbucks rolled out 25 new outlets in Q2FY23, the highest ever in one quarter. It now has 300 stores across 36 cities. It reported revenue growth of 57% led by the normalization of out-of-home consumption. Almost 99% of Starbucks stores are now open, the brokerage said in its report.

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