Tata Consumer May Find Buffer in Margins

Earnings growth may help maintain premium valuation

- RAM PRASAD SAHU

Tata Consumer Products delivered a mixed performance in the April-June quarter (Q1), but brokerages remain optimistic about the stock, citing an improving margin trajectory.

Though the stock is down 3 per cent from its monthly highs, gains on the gross margin front could limit further downside. At current levels, the stock trades at 53x its 2026-27 earnings estimates and is expected to maintain a valuation premium, backed by strong earnings growth expectations.

The Q1 result fell short of Street estimates. Strong growth in the company's core tea and salt businesses failed to offset the sluggish performance in its growth portfolio, dragging down overall numbers. Revenue rose 9.8 per cent year-on-year (Y-o-Y), driven by a 12 per cent uptick in India tea and 13 per cent in salt.

However, weak numbers from NourishCo due to unseasonal rains, flat sales at Capital Foods due to temporary issues, and a sharp decline in profitability in the unbranded business due to falling coffee prices, weighed on the quarter.