Tata Consumer Products expects to gain market share in salt business

Tata Consumer Products, a leading player in the FMCG sector, has reported impressive operating performance in the third quarter of the current financial year. The company showcased growth across various categories, propelling its earnings before interest and taxes (EBIT) by an impressive 29 per cent annually. This stellar performance was underpinned by strong showings in India beverages, India foods, International beverages, and non-branded businesses, which witnessed EBIT growth rates of 28 per cent, 15 per cent, 23 per cent, and a remarkable 81 per cent, respectively.

The Mumbai-based brokerage firm Motilal Oswal has raised its fiscal year 2024 (FY24) EBITDA estimate by 5 per cent. Furthermore, the brokerage has maintained its "buy" recommendation on Tata Consumer Products' stocks for target price of Rs 1,370.

In line with expectations, Tata Consumer Products reported a revenue of Rs 3,800 crore, marking a 9 per cent annual increase. The company's earnings before interest, taxes, depreciation, and amortisation (EBITDA), commonly referred to as operating profit margin, saw an improvement of 200 basis points annually, reaching 15 per cent in December quarter. The improvement was primarily attributed to a rise in gross margin, which surged by 230 basis points to 43.8 per cent, compared to 41.5 per cent in the corresponding period last year. Operating profit also witnessed an uptick, rising 26 per cent annually to Rs 570 crore.

Margin expansion was fuelled by several factors including pricing adjustments in international markets, a favourable trend in commodity costs, and effective control over operating expenses.

The Indian branded business segment registered a growth of 10 per cent, amounting to Rs 2,370 crore. Both Indian branded beverage and India food businesses recorded revenue growth rates of 8 per cent and 12 per cent year-on-year (YoY), respectively. EBIT for this segment grew by 23 per cent YoY to Rs 370 crore, primarily driven by the robust performance of the Indian branded beverage sector, which witnessed a 28 per cent annual increase.

Additionally, Tata Consumer Products highlighted positive volume growth in India Beverages and Foods by 2 per cent and 5 per cent annually, respectively, in the third quarter of FY24. The salt segment saw 6 per cent YoY revenue increase driven by a volume growth of nearly 5 per cent. The Tata Sampann portfolio also demonstrated robust growth, surging by 40 per cent annually, supported by strong volume growth and traction in the dry fruits segment, which soared by 70 per cent YoY.

NourishCo, a joint venture between Tata Consumer Products and PepsiCo, reported a revenue growth of approximately 34 per cent annually to Rs 159 crore in the third quarter, fuelled by growth in both value and premium businesses. Similarly, Tata Starbucks witnessed a 7 per cent annual revenue growth.

Growth outlook

Tata Consumer Products remains optimistic about its growth trajectory. The company expects to continue gaining market share in the salt business and aims for a revenue target of Rs 900-1,000 crore for NourishCo in FY24. Additionally, Tata Consumer Products anticipates a significant contribution from new businesses, including Capital Foods and Organic India, which are projected to constitute 30 per cent of the India Branded Business, fuelled by a 30 per cent revenue compound annual growth rate (CAGR), Motilal Oswal said.

Tata Consumer Products' strategic focus includes strengthening its core business, exploring new opportunities, unlocking synergies, digitalising the supply chain, expanding its product portfolio, enhancing focus on premiumisation and health & wellness products, embedding sustainability practices, and expanding its sales and distribution infrastructure, the Mumbai-based brokerage added.