Tata Consumer shares jump post Q3 earnings; strong India growth offsets margin pressure
Tata Consumer's shares rose over five percent post-Q3 earnings, driven by strong India growth. However, analysts caution that margin pressures from rising tea costs could limit near-term potential.
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Tata Consumer Products' shares surged over 5 per cent on Friday after the company posted a robust top-line performance in Q3 FY25, despite profit pressures from higher tea prices.
Analysts remain divided on the stock, citing strong domestic momentum but margin constraints.
Revenue growth driven by India business
Tata Consumer Products reported a 17 per cent year-on-year (YoY) increase in revenue, reaching Rs 4,444 crore in Q3 FY25. The India business was a key growth driver, registering a 23 per cent YoY rise (+ten per cent organic). Within this segment, India Beverages grew nine per cent, marking a multi-quarter high. The coffee division maintained its strong momentum with 28 per cent revenue growth, while innovation in ready-to-drink beverages continued with the expansion of Tata Coffee Grand cold coffee and new product launches.
“During the quarter, we recorded robust double-digit growth in the India tea business, backed by strong volume growth. There has been continued momentum and market share gain in the India salt business, along with strong growth in Tata Sampann,” said Sunil D’Souza, MD & CEO of Tata Consumer.
Profit remains flat amid tea inflation
Despite strong revenue growth, net profit remained unchanged at Rs 279 crore, impacted by a sharp increase in tea costs. Consolidated EBITDA stood at Rs 578 crore, flat on a YoY basis, as the surge in raw material prices offset volume gains. Analysts note that inflation in tea costs is expected to persist, potentially affecting margins in the coming quarters.
Analyst views: Buy or hold?
Goldman Sachs maintained a ‘Neutral’ rating on the stock, setting a target price of Rs 1,040. The brokerage pointed out that while Tata Consumer continues to outperform in volume growth, margin pressures remain a key concern.
On the other hand, Jefferies reiterated a ‘Buy’ rating, albeit with a revised target price of Rs 1,100 (down from Rs 1,130). The firm cited strong growth execution and stabilization of recent acquisitions but acknowledged headwinds from margin constraints. EPS estimates for FY25-27E have been lowered by 4-8 per cent due to these concerns.
Stock outlook
Tata Consumer shares hit an intraday high of Rs 1,019.95 following the earnings announcement. The company’s strong domestic performance continues to support the stock, but analysts caution that persisting margin pressures from tea inflation could limit upside potential in the near term. Investors will be watching closely for any price stabilization and cost-control measures in the upcoming quarters.
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