Tata Consumer Products shares hit 52-week high; should you buy this stock or wait?

The stock has been on a roll for the last three months. On March 16, 2023, Tata Consumer Products shares hit their 52-week low of ₹685. The stock has risen 26 per cent in three months to hit its fresh 52-week high.

The recent rise in the stock could be attributed to the company’s March quarter earnings to a fair extent. The company on April 25 reported a rise of 21 per cent in consolidated net profit to ₹289.6 crore in the quarter ended 31 March 2023. This is against ₹239 crore in the corresponding quarter last year.

The consolidated revenue from operations during the fourth quarter rose by 14 per cent to ₹3,619 crore, as compared to ₹3,175 crore in the year-ago period.

The stock jumped 7.5 per cent in April, snapping the losing streak of the last four consecutive months. In May, the stock rose over 4 per cent and in June so far, it is up over 8 per cent.

The company looks well-placed on the path of growth which makes the stock a decent buy for the long term.

As Mint reported, Tata Sons Chairman N. Chandrasekaran said Tata Consumer Products is undergoing a transformation to establish itself as a comprehensive fast-moving consumer goods (FMCG) company.

Speaking at the company’s 60th annual general meeting held on June 6, he said the firm is not only exploring expanding to new categories but actively seeking acquisition opportunities.

In FY23, the company that sells Tata Tea and Salt posted an 11 per cent jump in consolidated revenue to ₹13,783 crore. Overall, India business was up 10 per cent led by its food portfolio.

Read more: Tata Consumer to enter new categories

Brokerage firm Prabhudas Lilldher underscored that Tata Consumer Products has undertaken several initiatives to improve its presence in the FMCG space through (a) an increase in distribution (direct reach of 1.5 million in FY23 versus 0.5 million in FY20), (b) focus on large categories such as Tata Sampann (pulses, spices and dry fruits), (c) entry into high growth categories with Soulfull (breakfast cereals, mini meals and snacking options), (d) two times increase in capacity and significant ramp up in distribution and new innovations in NourishCo, (e) improving management bandwidth with the merger of Tata Coffee with Tata Consumer Products, and (f) acquisitions in niche product offerings.

Prabhudas Lilldher believes Tata Consumer will continue to focus on distribution expansion across segments – more so in NourishCo (a joint venture between Tata Consumer Products and PepsiCo India) and taking Tata Sampann deeper in general trade.

“We expect NourishCo, Tata Soulfull and Tata Sampann to grow in high double digits and increase their share in sales from the current 15per cent in the coming years. We believe steady growth in the core Tea business and sustained traction in high-growth segments will enable Tata Consumer to report strong growth in the coming years,” said Prabhudas Lilladher.

After the Q4FY23 earnings of the stock, brokerage firm Motilal Oswal Financial Services maintained a buy call on the stock with a target price of ₹910 and retained its FY24 and FY25 EPS (earnings per share) estimates.

Brokerage firm ICICI Securities also maintained a buy call on the stock with a target price of ₹900. Brokerage firm Nirmal Bang also maintained a buy call on the stock with a target price of ₹900.

Read more: Tata Consumer Products: Is it a buy after Q4? Here’s what top brokerages say

The stock could be a buy for the long term but some technical analysts appear cautious on the stock for the short term because of its recent steep rise.

Jigar S. Patel, Senior Manager of Equity Research at Anand Rathi Share and Stock Brokers says one should not buy this stock at the current juncture and those who are already invested should book some profit.

“In the last three months, this stock has already given over 25 per cent returns. Though it looks lucrative due to recent up-moves, one needs to be cautious since it is approaching its historical top near ₹880-890 levels,” Patel pointed out.

“On the indicator front, daily RSI and stochastics are displaying some negative-regular divergence which hints towards some pullback in a few sessions. As of now, no fresh longs are recommended. If already bought, then book profits in the zone of ₹870-890 levels,” Patel said.

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Gaurav Bissa, VP of InCred Equities highlighted Tata consumer has been making higher highs and higher lows on the weekly charts which is a characteristic of an uptrend. He said the stock has been trading in a consolidation phase since September 2021. The volumes dried up too during this period, suggesting a lack of interest by the market participants. But the stock is now showing early signs of a breakout from the two-year wedge pattern on the weekly charts which once confirmed can push it to the level of ₹1,000 in the coming weeks.

“The stock is on the verge of triggering a buy signal in the Ichimoku studies which can result in the start of a fresh uptrend. Those with higher risk appetite can buy at the current levels with a stop loss at ₹790 whereas safe traders should wait for a confirmation which will come on a weekly close above ₹850 level for a target price of ₹1,000,” said Bissa.

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Disclaimer: The views and recommendations given in this article are those of individual analysts and brokerage firms. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.

Updated: 14 Jun 2023, 12:53 PM IST