Nomura said it expects this to be a multi-year journey with the company deepening its core in mature but highly unorganised categories and aggressively expanding into large packaged staples categories. Tata Consumer is also leveraging its distribution and foraying into higher-margin niche packaged foods categories.
Tata Consumer which recently got included in the Nifty index, ended up 1.85% at ?650.30 on Thursday. Shares of Tata Consumer are up 205% in the last one year.
The brokerage expects operating margins of Tata Consumer to expand by 200 basis points over the FY21-23 period led by merger synergies and international business which is likely to deliver stable growth.
“TCPL, with its strong positions in tea (No.1 in India by volume) and salt (65% share in branded segment) will benefit disproportionately from a shift from unorganised to branded post-pandemic,” said Nomura.
The brokerage said the company’s foray into new food and beverages categories such as snacks, breakfast cereals, packaged water, branded coffee and artificial sweetener is in the right direction. Moreover, it has significant room to grow its Sampann foods business as the significant portion of the segment for pulses and spices remains unorganised in India.
Nomura said Tata Consumer can sustain the growth and margin trajectory with new launches in higher-margin non-black teas and cross-pollinating products.