ICICI Securities: Tata Consumer Products ‘Show Me’ Verses ‘Trust Me’ Value Creation Story
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ICICI Securities Report
Consensus (including us) believes and hopes in ‘value creation story’ of Tata Consumer Products a 60% and 140% stock returns over one year and three years is testimony. The phase of ‘Trust me’ story is over. With TCPL’s FY22 valuations at a premium to Colgate, Godrej Consumer Products, Marico, it’s now a ‘Show me’ story.
Tata Tea (India) needs to sustain 6-8% volume growth via formalization, market share gains due to regionalization and premiumisation. Tata Salt volume growth needs to accelerate to 8% (from approximately 5% earlier). It generates lowest revenue/grammage among packaged food products in India and hence distribution was capped due to higher freight costs. Merger of distribution (mixed load) will help to reduce freight cost and leverage the brand potential.
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