Earnings Outlook
Higher tea prices to weigh down Tata Consumer in Oct-Dec
This story was originally published at 14:32 IST on 29 January 2025
Register to read our real-time news.Informist, Wednesday, Jan. 29, 2025
By Steffy Maria Paul
MUMBAI – One of India's largest tea retailers, Tata Consumer Products Ltd.'s growth during the December quarter will likely be supported by new ventures and acquisitions as its core segments are expected to post muted volumes, according to analysts. The margin of the company's domestic business is expected to contract sharply during the quarter on account of the high inflation seen in tea prices. Conversely, the margin of its international business is seen improving on year driven by price hikes and lower input costs.
For the December quarter, the consolidated net profit of the fast-moving consumer goods company is seen rising 17% on year to INR 3.26 billion, according to an average of estimates from 11 brokerages. A few brokerages expect the company's net profit to decline during the quarter mainly on account of the amortisation charges related to its recent acquisitions. The estimates for net profit range from INR 2.79 billion by Nuvama Wealth Management Ltd. to INR 3.65 billion by KR Choksey Research.
Tata Consumer's consolidated net sales are expected to rise 16% on year to INR 44.04 billion for the latest quarter, the estimates showed. The lowest estimate for the top line was INR 43.02 billion by Nirmal Bang Equities Pvt. Ltd., while the highest was INR 45.01 billion by Elara Securities (India) Pvt. Ltd. Sequentially, the net profit is seen falling 10.5%, while net sales may rise 4.5%.
Brokerages expect the company's growth during the quarter to have been underpinned by a strong performance in the domestic foods and beverages segment along with contributions from the recently-acquired Capital Foods and Organic India businesses. Kotak Institutional Equities expects the company's domestic foods business to grow 13% on year during the quarter, led by a 9% growth in the salts segment and a 25% growth in the 'Sampann' product portfolio. The growth in the salts segment would likely be aided by an INR 2 per kilogram price hike taken by the company. The brokerage expects the Capital Foods business to clock a revenue of INR 2.15 billion and the Organic India business to post a revenue of INR 1.05 billion during the quarter.
The company, in January 2024, had acquired Capital Foods and Organic India. Capital Foods owns brands such as 'Ching's Secret' and 'Smith & Jones'. Ching's Secret deals in chutneys, blended masalas, sauces, and soups, Smith & Jones caters to in-home cooking of Italian and other western cuisines. Organic India, on other hand, caters to organic brands in food and beverages, and herbal and traditional supplements. Nuvama Institutional Equities expects the Capital Foods business to grow 5% sequentially and the Organic India business to remain flat on quarter.
Nuvama expects the domestic beverage business to grow 2% on year during the quarter. The volumes in the tea segment are expected to rise 3% in the quarter with the segment's margin remaining under pressure from a 25-30% rise in tea prices. The company has taken a 5% price hike in the tea segment, which makes up for 30% of the overall business.
NourishCo, the beverage arm of Tata Consumer's, will report an 8?ll during the quarter despite a double-digit growth in volumes, due to higher spending on trade promotions, Nuvama said. The segment hosts brands such as Tata Copper Plus, Gluco Plus, Fruski, and Himalayan Natural Mineral Water. The brokerage expects the company's international business to grow 6% on year in constant currency terms and its non-branded business, which largely comprises solubles and plantations business, to grow 20% on year due to strong realisations for coffee in the plantation business.
The company is expected to report earnings before interest, tax, depreciation, and amortisation of INR 5.71 billion for the December quarter, according to the average of estimates from 10 brokerages. The EBITDA is expected to be in range of INR 5.08 billion to INR 6.37 billion. The EBITDA margin is expected to contract by 220 basis points to 12.8%, which could be limited by slight savings in overheads, YES Securities said in its earnings preview. Prices of tea and coffee will be key monitorables, analysts said.
Tata Consumer will detail its results for the December quarter on Thursday. At 1255 IST, shares of the company traded at INR 954.95 on the National Stock Exchange, down 0.7%. The stock has fallen 6% since the company detailed its September quarter earnings. During the previous quarter, the company's net profit had risen 8% on year and its revenue had grown 13% on year. All 11 brokerage reports on the company available with Informist have a 'buy' or equivalent rating on the stock.
Following are the Oct-Dec earnings estimates for Tata Consumer Products based on reports from 11 brokerage firms in descending order of net profit estimate (in INR million):
| Brokerage Firm | Net Sales | Net Profit | EBITDA |
| KR Choksey Research | 43,511.00 | 3,647.00 | 6,333.00 |
| Sharekhan Ltd. | 44,060.00 | 3,560.00 | -- |
| Systematix Shares and Stocks (India) Ltd. | 43,377.00 | 3,490.00 | 5,949.00 |
| Nirmal Bang Equities Pvt. Ltd. | 43,023.00 | 3,378.00 | 6,367.00 |
| Motilal Oswal Financial Services Ltd. | 44,122.00 | 3,360.00 | 5,517.00 |
| YES Securities (India) Ltd. | 43,902.00 | 3,304.00 | 5,619.00 |
| Elara Securities (India) Pvt. Ltd. | 45,007.00 | 3,138.00 | 5,603.00 |
| JM Financial Institutional Securities Pvt. Ltd. | 44,451.00 | 3,117.00 | 5,667.00 |
| Nomura Equity Research | 44,182.00 | 3,083.00 | 5,081.00 |
| Kotak Institutional Equities | 44,993.00 | 3,029.00 | 5,640.00 |
| Nuvama Wealth Management Ltd. | 43,801.00 | 2,786.00 | 5,366.00 |
| Average | 44,039.00 | 3,262.91 | 5,714.20 |
End
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Akul Nishant Akhoury
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