Tata Consumer Products Share Price Target at Rs 1,360: Motilal Oswal Research
Motilal Oswal Financial Services has reaffirmed its BUY rating on Tata Consumer Products (TCPL) with a 12-month target price of Rs 1,360, projecting 21% upside from current levels. The analysis highlights TCPL's strategic balance between defending its tea/salt dominance (78% of FY25 sales) and scaling high-growth segments like premium staples and millet-based products. Key catalysts include 150 product launches since FY21, 16% international revenue growth, and distribution expansion to 4.4 million outlets. With FY25-27 EBITDA/PAT estimated to grow at 13%/20% CAGR and FCF yield of 1.8%, the stock trades at 56x FY27 P/E – a discount to FMCG peers.
Core Business Fortification Meets Growth Engine Acceleration
Tata Tea maintains its 20% market share through premiumization strategies like Gold Vita Care (vitamin-infused variants) and regional customization. The salt division delivered 15% CAGR over FY20-25, with value-added products now constituting 31% of segment revenue.
Growth verticals now contribute 28% of total sales (vs 8% in FY21), led by:
| Brand | FY25 Revenue | Growth Driver |
|---|---|---|
| Tata Sampann | Rs 11B | 31% CAGR since FY21 |
| Tata Soulfull | 5x since 2021 | 600K outlets vs 15K at acquisition |
| Capital Foods | Rs 11.7B | 19% YoY growth |
Global Footprint Expansion Through Strategic Market Plays
International operations grew 16% in FY25, contributing 29% to branded business revenue. Regional breakdown shows:
Middle East: 3rd consecutive year of double-digit growth via Tetley's Saudi expansion
South Africa: Laager Plus CBD captures functional beverage demand
USA: 38.5% sales surge through Wholesale Foods partnership
Innovation Engine Driving 5.2% Sales From New Launches
TCPL's R&D focus yielded disruptive products including:
- Tetley Kombucha: Wellness segment entry
- Tata Copper+ Alkaline Water: 18% FY25 growth
- No-Maida Rusk: Health-conscious bakery alternative
The innovation-to-sales ratio improved to 8% in FY25 from 2.8% in FY23.
Financial Health: Cash Flow Champion With Improving Margins
| Metric | FY25 | FY26E | FY27E |
|---|---|---|---|
| Revenue (Rs B) | 176.2 | 189.3 | 204.9 |
| EBITDA Margin | 14.1% | 14.7% | 15.4% |
| FCF Yield | 1.4% | 1.4% | 1.8% |
Operating cash flow remained robust at Rs 20.6B despite 40% YoY capex increase to Rs 4.6B.
Valuation & Technical Levels
Motilal's sum-of-parts valuation considers:
- India Branded Biz: 44x EV/EBITDA
- Starbucks JV: DCF valuation at Rs 90.9B
- Organic India: 35x EV/EBITDA multiple
Price Levels to Watch:
Support: Rs 1,040 (200-DMA)
Resistance: Rs 1,247 (52-week high)
Risks to Investment Thesis
1) Commodity price volatility in tea/coffee
2) Integration challenges with Capital Foods
3) Slower-than-expected rural demand recovery
Investor Takeaway: Accumulate on Dips Toward Rs 1,100
With TCPL trading at 65.8x FY26E P/E vs 3-year average of 72x, Motilal recommends staggered buying. The 0.6% dividend yield provides downside protection while awaiting multiple expansion catalysts from:
- Starbucks' 1,000-store target by FY28
- Pharma channel rollout for Organic India
- MAVIC platform-driven distribution efficiency
