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Morgan Stanley Gives Future Consumer Its Most Bullish Target Price Yet

Shares of Future Consumer Ltd. could reach Rs 95, international broking firm Morgan Stanley said in a research report. The target price implies a potential upside of 61 percent from yesterday’s close. It is the highest price target on the company so far, among the analysts tracked by Bloomberg.

The research company initiated its coverage on the fast moving consumer goods company with ‘Overweight’, rating as it expects its margins to expand, led by scale-driven efficiencies, better fixed-cost absorption, and product mix improvement.

The broking firm expects the food maker and distributor’s operating margins to expand by 470 basis points by March 2020.

We think of Future Consumer as a start-up, building its business on the FMCG 2.0 platform— launching innovative products in emerging categories, leveraging digital assets, and focusing on consumer acquisition closer to the point of sale. 
Morgan Stanley Research Report

The brokerage house expects Future Consumer to become the country’s fifth-largest FMCG company by March 2021. It also assumes the company to contribute over 90 percent of financial year-ending March 2020’s revenues, compared to 74 percent expectations in the next financial year and forecast its revenues to jump 3.2 times by March 2020.

In the bull case, the research firm sees an opportunity for 1.5 times its base case revenues, based on the success of the group's small format store strategy.

Dependence on Future Retail’s store expansion for growth, the organisational capability to manage rapid growth, limited history of successful product launches in the home and personal care category, relatively high working capital deployment, and food safety control are the key risks for the firm, the research report said.

Shares of Future Consumer have given returns of 225 percent so far this year, compared to 25.9 percent advance in the country’s benchmark S&P BSE Sensex Index.