This Tata group stock turned Rs 50,000 to over Rs 3.50 lakh in 10 years; should you invest now?

From your bed tea to dinner, Tata Consumer Products has become a household name with its two strong brands Tata Tea and Tata Salt. After the merger of Tata Global Beverages and consumer products portfolio of Tata Chemicals in February 2020, the merged entity Tata Consumer Products has been focussing on driving synergies in the distribution and supply chain. With its robust performance on Dalal Street, the company was added to the benchmark equity index NSE Nifty in March this year.

Shares of Tata Consumer Products have advanced 633% to Rs 702.65 on June 9, 2021 from Rs 95.80 on June 10, 2011. That means a Rs 50,000 investment made in the stock 10 years ago would have fetched Rs 3.66 lakh at present.

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Of late, the company forayed into the premium roast and ground coffee segment with the launch of the brand ‘Sonnets By Tata Coffee’. Through ‘Sonnets By Tata Coffee’, Tata Consumer Products is targeting customers seeking a special coffee experience.

For the quarter ended March 31, the company reported a consolidated net profit of Rs 53.90 crore against a loss of Rs 76.49 crore in the same period last year. Revenue from operations increased 26.28% YoY to Rs 3,037.22 crore.

Should you buy?
ICICI Securities said that the company has continued to invest in distribution merger and expansion. It delivered material market share gains of 190 basis points and 160 basis points in India tea and salt, respectively in March 2021.

“March 2021 exit market shares in tea and salt were around 24% and 35%, respectively. Working capital days were reduced to 39 in FY21 from 87 in FY20 – driving strong free cash flow generation. Starbucks is now present in 18 cities with 221 outlets. We retain ‘Buy’ on Tata Consumer (TCPL) with a price target of Rs 800,” ICICI Securities said in a report.

Brokerage Motilal Oswal Financial Services also has a ‘Buy’ call on Tata Consumer Products with a price target of Rs 775. “On the back of strong cash generation and lower debt levels, the gross debt-to-equity ratio stood at 0.05 times in FY21 (v/s 0.09x in FY20). This gives TCPL enough headroom to carry out various expansions and branding activities for its newly diversified product portfolio, along with its existing basket of products,” the brokerage said adding the merger of the India Food business with TCPL is in sync with the
management’s vision to create a single FMCG-focused company.

Motilal Oswal Financial Services further added that the merger offers multiple synergies, including higher outlet coverage, focused new product development, strong cash flow generation, and scale efficiencies.