IGI Logo

Operating performance beats our estimates

* Tata Consumer Products (TATACONS) reported a healthy operating performance (EBIT up 15% YoY) in 4QFY23, led by 21% YoY EBIT growth in the India Branded business on the back of cost optimization measures. International branded business EBIT declined marginally YoY due to inflationary pressures and adverse currency movements; however, sequentially EBIT witnessed 44% growth, aided by pricing actions.

* While the 4Q performance was better than our estimates, we maintain our FY24/FY25 EPS estimates and retain BUY on the stock with our SoTP-based TP of INR910.

Standalone business drives growth

* TATACONS reported revenue of INR36.2b (est. INR35b) in 4QFY23, up 14% YoY. EBITDA margin remained flat YoY at 14.1% (est. 13.8%) due to lower gross margins at 41.8% (v/s 44.6% in 4QFY22), offset by low employee costs and low other expenses (incl. A&SP) as a percentage of sales by 290bp (combined). EBITDA increased 15% YoY to INR5.1b (est. INR4.8b).

* The Indian branded business grew 15% YoY to INR22.5b. EBIT grew 21% YoY to INR3.1b. International branded beverages revenue grew 11% YoY to INR9.8b, with EBIT marginally declining 1% YoY to INR1.3b.

* Volumes in India Beverages/Foods grew 3%/8% YoY in 4QFY23. TATACONS maintained its strong growth trajectory in Salt, with revenue growth of 24%/17% in 4QFY23/FY23. The Tata Sampann portfolio grew 35%/29% in 4QFY23/FY23, aided by a broad-based performance in staples and dry fruits.

* Revenue from Nouishco rose 79% to INR1.8b in 4Q and stood at INR6.2b in FY23. Tata Starbucks grew 48%/71% YoY in 4Q/FY23, driven by a revival in out-of-home consumption and strong store additions. It added 22 new net stores in 4Q. In FY23, it entered 15 new cities and added 71 new stores, registering the highest-ever annual store addition.

* In FY23, consolidated revenue/EBITDA/adj. PAT grew 11%/8%/11% YoY to INR137.8b/INR18.6b/INR10.8b. Standalone revenue/EBITDA/adj. PAT grew 7.6%/19%/8% YoY to INR85.4b/INR13.2b/INR9.8b.

* CFO/FCFF for FY23 stood at INR14.6b/INR11.5b v/s INR15.2b/INR12.4b in FY22 with CFO/EBITDA ratio of 79% v/s 88% in FY22. Net Cash as on 31st Mar'23 stood at INR29.5b.

Highlights from the management commentary

 * The management has guided for further margin improvement in the international business by 2QFY24, with margin expected to be at least 100- 150bp higher than consolidated EBIT. The India business should witness EBIT margin improvement in FY24.

 * The management reaffirms its mid-single digit growth guidance for the salt and tea volumes over the mid to long term.

* Management expects to increase NourishCo’s distribution network and targets revenue of over INR10b in FY24 (v/s INR6.2b in FY23).

To Read Complete Report & Disclaimer Click Here

For More Motilal Oswal Securities Ltd Disclaimer http://www.motilaloswal.com/MOSLdisclaimer/disclaimer.html

SEBI Registration number is INH000000412

Above views are of the author and not of the website kindly read disclaimer