Shares of Tata Consumer Products have remained under pressure ever since the company posted its results for the quarter ended March. In the last 30 days, the stock has gone down around 4%, but analysts at Motilal Oswal remain bullish on the stock.

The Tata Consumer Analyst: Analysts at Motilal Oswal maintained their “buy” rating for the stock with a target price of ₹1,350. The target indicates an around 24% upside from the stock’s current levels of around ₹1,095.

The Tata Consumer Thesis: The brokerage said that the FMCG giant has a hidden gem within its brand portfolio called Starbucks. The analysts said that the company entered into a joint venture agreement with Starbucks in 2013. Since then, Tata Starbucks has effectively leveraged India’s burgeoning coffee chain market, experiencing rapid expansion and achieving revenues of approximately ₹1,220 crore in FY24.

The brokerage firm said that the coffee chain market in India is growing faster, led by increasing demand from younger, aspirational consumers, increasing global exposure, and increasing adoption of Western culture. The domestic brokerage cited Statista Research which puts the India Coffee Chain Market at an estimated ₹4,500 crore in CY23.

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The brokerage highlighted that the coffee giant has ramped up its store expansion efforts in the last five years, multiplying its store count from 146 outlets in FY19 to 421 outlets in FY24, representing a compound annual growth rate (CAGR) of approximately 24% in store additions during this period. Looking ahead, the company aims to further accelerate its growth trajectory, targeting approximately 1,000 outlets by FY28, which translates to nearly 2.5 times growth over the next four years, with an anticipated CAGR of around 25%.

In addition to expanding its footprint, the analysts also pointed out that Tata Starbucks is concentrating on enhancing store economics. It is implementing a successful pilot program across additional stores, which involves revamping menu offerings, décor, and introducing new serving sizes. These initiatives aim to bolster the annual revenue per store, which stood at approximately ₹3.2 crore in FY24.

Considering this strategic growth plan and the robust growth of the Indian coffee chain market, estimated at around 10-12% annually, analysts project Tata Starbucks to achieve a revenue and EBITDA compound annual growth rate of approximately 26% and 35%, respectively, over the period spanning FY24 to FY26.

Price Action: Tata Consumer’s share price was down 0.75% to trade at ₹1,091.50 in early trade on Friday.

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