Strong jump in online sales – Tata Consumer

Update on the Indian Equity Market:
On Monday Nifty closed 0.7% higher at 13,356. Among the sectoral indices, Media (+2.8%), PSU Bank (+2.1%), and Pharma (+1.6%) closed higher. Nifty Realty (-0.3%) was the only sector which closed lower. UPL (+4.6%), Adani Ports (+3.6%), and HUL (+3.2%) closed on a positive note. SBI Life (-1.5%), Nestle (-1.4%), and Kotak Bank (-1.4%) were among the top losers.

Excerpts from an interview of Mr. Sunil D’Souza, MD and CEO, Tata Consumer with CNBC-TV18 dated 3rd December 2020:

● Any M&A deal of size and significance that happens in India does pass through the Tata Group.
● For the March quarter, 2.5% of sales were online and now sales are around 5-6% online out of total sales.
● There is a strong jump in online sales and the company expects the momentum to continue.
● On the food and beverages business, he said the results were good and the company is happy with its numbers.
● The core category business and out of home businesses are showing traction as there is an ease in lockdown.
● On Core categories, he said the tea is coming back to double-digit value growth. The company is gaining market share.
● On Tata sampann, he said it has outgrown the total food business by 3x.
● On tea prices, he says, the prices are moving in a small range. On the coffee side of the business, he says, Eight O’clock coffee which is a big brand is showing good momentum.
● On domestic side, Tata Coffee which is a subsidiary is a B2B business and there is some softness.
● On Starbucks, he said the company will continue to open outlets. The company has 201 outlets. The number of outlets opened this year might be equal to what the company opened last year.

Consensus Estimate: (Source: market screener and Investing.com websites)
● The closing price of Tata Consumer was ₹ 567 as of 7-December-2020. It traded at 57x/ 46x/ 41x the consensus Earnings per share estimate of ₹ 10/12.3/13.9 for FY21E/ FY22E/ FY23E respectively.
● The consensus average target price for Tata Consumer is ₹ 571/- which implies a PE multiple of 41x on FY23E EPS of 13.9/-.
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