Tata Consumer Products overtakes Marico in m-cap; stock scales fresh peak

Shares of Tata Consumer Products rallied nearly 5 per cent to hit a fresh record high of Rs 542.90 apiece on the BSE on Thursday. With today's rally, the company surpassed the fast-moving consumer goods (FMCG) major Marico in terms of market capitalisation (m-cap).

At 01:51 pm, the stock was trading over 4 per cent higher at Rs 539 on the BSE with the m-cap of Rs 49,667.03 crore. In comparison, Marico's m-cap stood at Rs 47,137.39 crore while the share price of the company was trading 0.38 per cent higher at Rs 365. 

Since July 1, shares of Tata Consumer Products have surged an impressive 41 per cent, BSE data shows. 

Tata Consumer Products reported an 81.78 per cent year-on-year (YoY) rise in its net profit at Rs 345.55 crore for the quarter ended June (Q1FY21), aided by an increase in demand in some categories. Revenue from operations was up 13.44 per cent to Rs 2,713.91 crore as against Rs 2,392.36 crore in the corresponding period of the last fiscal. 

Analysts at ICICI Securities expect steady improvement in earnings before interest, taxes, depreciation, and amortisation (EBITDA) margin in FY21-22 due to the rising share of higher-margin branded products in India, revenue and cost synergy benefits, savings in distribution and cost-saving initiatives, and lower input prices.

While Starbucks operations continue to be impacted due to lockdown, 60 per cent of 186 stores have reopened now. "While we expect a gradual recovery in Starbucks business activities, we model losses in FY21," the brokerage said in a result review note.

It maintains an "ADD" rating on the stock with the target price of Rs 450.

Those at Motilal Oswal Financial Services (MOFSL) note that the merger of Tata Chemicals’ Food business with Tata Consumer Products is in line with Tata Group’s focus on creating a single FMCG-focused company. "The merger offers multiple synergies, including higher outlet coverage, focused new product development, stronger cash flow generation, and scale efficiencies," the brokerage said in a note issued on August 5. 

Factoring in the better-than-expected performance and margin expansion in the India F&B segment, it has increased its earnings estimates for FY21/22E by 30 per cent / 22 per cent, with a "BUY" rating on the stock and the target price of Rs 560.