Target: ₹1,150
CMP: ₹1,016.45
While near-term demand remains soft dragging sales growth, Tata Consumer Products’ average selling price (ASP) increase in the tea business and growth momentum revival in NourishCo would be critical for improving sales growth and margin. We believe increased competition coupled with slower growth in the urban markets are key near-term headwinds.
However, we favour Tata Consumer for its wide product offerings and possible gains from distribution expansion, which would provide visibility on double-digit sales growth and margin expansion in the long term.
Net sales grew 12.9 per cent y-o-y in Q2 to ₹4,210 crore, 2 per cent below our estimates, with organic growth of 5 per cent y-o-y (adjusted for new acquisitions). India beverages grew 3 per cent y-o-y due to a 4 per cent decline in the organic business, dragged by softer demand and competition in tea, down 4 per cent y-o-y in volume and NourishCo, a decline by 11 per cent y-o-y. Raw tea prices inflated by 30 per cent y-o-y, but it could not fully pass on cost due to competition, although staggered price increases were implemented across brands.
We cut our earnings by 7.5 per cent for FY26 and 6.7 per cent for FY27, due to lower revenue and margin.