Tata Consumer Products are integrating all its consumer business under one fast-moving consumer goods(FMCG) company, TCPL(Tata Consumer Products Limited). The company earlier was known as Tata Global Beverages. It got the consumer product business of Tata Chemicals which now transformed into food and beverages with presence in the international market. It also extended itself by a cafe business in India through Starbucks.
Tata has the potential for a win-win situation in the sector. A series of earnings upgrades have occurred as the TCPL stocks have doubled during the lockdown and hit a record high at ₹437.8 last week. Tata Consumer Products share price has delivered 103% returns over three months. On March 2020 share price stood at ₹214. An investment of ₹1 lac in the stock in March would have turned ₹2.03 lac in July.
Credit Suisse sees the potential for faster growth in the tea and salt business and said that long term prospects of Starbucks were intact. The agency added that they expect high single-digit growth in tea and salt on share gains from loose and smaller brands which form the majority of markets share in these categories. In salt, TCL is the only national player with a 30% market share.
According to Bllomberg, the number of analysts tracking the stock has escalated more than 50% in the current year. The new CEO, the product portfolio and the environment brought a positive impact on shareholding returns on FMCG.
Tata expect a 16% earnings CAGR (compounded annual growth rate) over FY20-23 which will be ahead of the industry
Although, TCPL is a promising investment in the FMCG sector. TCPL is valued at four times its 2019-20 revenues. However, the risk profile of the business is high as it has domestic businesses, international businesses of tea & coffee, and Starbucks.
Due to the global economic crisis, it is difficult to predict between a seasonal business opportunity and a sustainable one for a long time period.
Long-term investors should well watch out the next quarters(of June) to get a better idea of its performance. By this time, the impact of COVID will be clearer for investors to take clear decisions.