Tata Consumer Products shares rose as much as 4.2% after quarterly profit climbed 16%, with tea and salt price increases helping offset cost inflation and support a modest margin recovery.
Tata Consumer Products shares climbed on Tuesday after the fast-moving consumer goods company reported quarterly results that were broadly in line with expectations, with investors focusing on a modest improvement in margins and signs that pricing actions are beginning to help offset inflationary pressure. The stock rose as much as 4.2% in intraday trade on the BSE after the company announced its latest earnings after market hours on Monday.
For the September quarter, Tata Consumer Products posted consolidated net profit of ₹470 crore, up about 16% from a year earlier, on revenue of ₹5,661 crore, a rise of 14%. The company’s earnings before interest, tax, depreciation and amortisation margin came in at 13.8%, slightly ahead of last year’s level, with brokerages saying the result reflected stronger performance in the international and non-branded businesses even as India margins remained under pressure.
The company has been raising prices to keep pace with costs, including tea price increases of roughly 8% to 10% since the start of the financial year and a 13% increase in salt prices, according to the Business Standard report. ICICI Direct said the India business grew 17% in the quarter, supported by an 11% volume increase, while operating margin improved by 31 basis points to 13.8%. Livemint also reported that Tata Consumer aimed to reach a 17% to 20% EBITDA margin in its India food and beverage business over the next three to five years.
Analysts remained constructive, but several trimmed their valuation assumptions as they weighed the pace of margin recovery against ongoing input-cost pressures and a wider re-rating in the consumer sector. JM Financial cut its target multiple and lowered its price objective while maintaining an Add rating, saying the full benefit of the tea and salt price increases should show up more clearly in the next quarter. Elara Capital also reduced its target price but kept an Accumulate stance, while SBI Securities said near-term growth should be supported by momentum in growth categories, distribution expansion and new product launches.
Disclaimer: This article is intended to inform and educate, not to recommend or endorse any financial product, investment or strategy. Please consider your own financial circumstances and seek professional advice where appropriate before making financial decisions.
