Tata Consumers has had a good run at the bourses this year. On a year-to-date basis, the stock has gone up around 24%. Analysts at Motilal Oswal see the stock going further up backed by the company’s strong tea segment.
The Tata Consumer Analyst: Sumant Kumar-led analyst team at Motilal Oswal maintained the “buy” rating for the stock with a target price of ₹1,110. The price indicates an around 17% upside from the stock’s current market price of around ₹950.
The Tata Consumer Thesis: The brokerage in its note said that during the Jan-Sep'23 period, the Tata Group company exhibited a 3% volume growth driven by consistent domestic demand. However, the analyst pointed out, that the company has faced a consecutive decline in market share over the last three quarters, experiencing drops of 113 basis points, 110 basis points, and 95 basis points YoY in 4QFY23, 1QFY24, and 2QFY24, respectively.
The brokerage attributes the erosion in market share to the resurgence of smaller players in the industry, who have been growing at a rate approximately 40% higher than their larger counterparts. The brokerage highlighted that the FMCG giant typically encounters fluctuations in its market share on a year-on-year basis, particularly when there is a cooling down of tea prices.
Looking forward, the brokerage said that the company is confident in reclaiming lost market share through strategic initiatives such as expanding its distribution network and bolstering its brand portfolio. An optimistic projection anticipates approximately 5% volume growth in the second half of FY24.
Analysts highlighted that the company is strategically pursuing a dual-pronged growth strategy to fortify its market presence. Firstly, the company is directing its attention towards new growth engines, exemplified by initiatives like Tata Sampann, NourishCo, Tata Soulfull, and the ready-to-eat/ready-to-consume business under the banner of Tata Smartfoodz.
Simultaneously, the company is aggressively expanding its distribution network and embracing digitization across the supply chain. The brokerage expects this concerted effort to be instrumental in propelling the company into the next phase of growth.
Price Action: Tata Consumer’s share price was down 0.19% to trade at ₹952.85 in early trade on Monday.
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