The Tata Consumer share price slumped as much as 4% in early trade on margin worries. The Q4 EBITDA margin came in at 13.5%, down 256 bps YoY. India Tea volume inched up 2% YoY, slightly below expectation, while India Salt volume increased 5% YoY, in line with projections. The revenue for India foods sustained robust momentum and the revenue from the ‘Ready-to-drink (RTD)’ segment increased 10% YoY. However, most brokerages retained the Buy rating as they expect margins to recover.
Motilal Oswal on Tata Consumer: Expect recovery in margins for India biz
Motilal Oswal expects margins to recover in the Indian beverage business due to hike in tea and salt prices and also the input prices seeing some stability. They pointed out that there are “early signs of better tea crop growth this harvest season.” International business is expected to continue delivering healthy operating performance.
According to Motilal Oswal, the continued synergy benefits from the integration of Capital Foods and Organic India are expected to be a “key driver of growth for the Indian food business.” They reiterated Buy rating with a target price of Rs 1,360 per share. This implies an upside of almost20% from current levels.
Nuvama on Tata Consumer: Cut FY26 EPS estimates marginally
Nuvama meanwhile has cut the FY26 and FY27 EPS marginally by a little over 1%. However they have retained the Buy rating on the stock with a revised target price of Rs 1,335 per share Vs earlier target price of Rs 1,255.
According to the brokerage house, the robust momentum in the Food business revenue coupled with 17% growth in beverages business has led by better pricing and a robust showing in NourishCo aided by re-indexing of retailer margins.
They added that the company guides mid-single digit volume growth for tea and salt for coming quarters, “in Capital Foods and Organic business, revenue guidance is 30% growth with focus on portfolio expansion and distribution. Tata Sampann revenue shall keep growing at 30%. Forty one products were launched during the quarter. E-commerce and quick commerce contribute 14% to the total revenue.”
Tata Consumer management expects margin pressure to ease
According to the Tata Consumer manager, the price hikes in tea will help ease margin pressure going forward. The price hike has compensated the cost in tea prices by 40% for Q4 and 30% for FY25.
Going forward, the company is focusing on gaining back the market share through volume growth. The management guided, “mid-single digit volume growth in both tea and salt for FY26.”
Tata Consumer: No impact of Trump tariff yet
The management clarified that, “since coffee is not produced in the US and is not a discretionary item, India is expected to be in an advantageous position if the US were to go ahead with its proposed import tariffs. No major competitive impact is expected. However, the impact of tariffs is yet to materialize.”
NourishCo generates 60-65% of revenue from Andhra Pradesh and Eastern India and its existing network of 40 plants offers ample room for growth, the management highlighted. Expansion or capex will occur only upon a substantial demand increase, they added.