Tata Consumer Products share price tanks 10% after Q2 results. Attract mixed reactions from the experts

Tata Consumer Products share price dropped by almost 10% following the Q2 results. In the second quarter of September 2024 (Q2FY25), FMCG giant Tata Consumer Products reported a slight 0.9% rise in its consolidated net profit to ₹367.21 crore, primarily affected by the cost of tea in the Indian market. Tata Consumer Products share price today opened at ₹1,055 apiece on the BSE, the stock touched an intraday low of ₹1,058.45 per share, and an intraday high of ₹987.20 apiece.

According to a regulatory filing from the company, a year ago, the company had reported a consolidated net profit of ₹363.92 crore.

During the quarter under review, its revenue from operations increased by 12.87 percent to ₹4,214.45 crore. In the year-ago period, it stood at ₹3,733.78 crore.

Brokerage firms have given a 'Buy' recommendation for the stock of the FMCG company following its Q2 earnings. They have emphasized that the company will concentrate on enhancing growth and profitability in its primary domestic business segments, namely Tea and Salt.

Here's what the brokerages say

Nuvama Institutional Equities

According to the brokerage's report, Tata Consumer recorded a 13% year-over-year increase in Q2FY25 revenue and a 16.6% year-over-year increase in EBITDA, which aligns with their predictions. In India, the food sector saw a 28% year-over-year expansion (9% like-for-like), with a 1% year-over-year increase in volume (like-for-like). Salt experienced a 2% year-over-year growth with steady volumes.

However, India's beverage sector was negatively impacted in Q2 by weather and competition from Campa (-4% year-over-year like-for-like), while tea volumes saw a 4% year-over-year decline. The growth business accounted for 29% of India's operations and achieved a 15% year-over-year growth (like-for-like).

“Inflationary tea/salt cost stays a worry; hence, we are cutting FY25/26/27E EPS by 4%/1.2%/3%. We are cutting P/E multiple for India business to 60x (from 65x) and rolling forward to Q2FY27E, yielding an SoTP-based target price of ₹1,350 (from ₹1,390); retain ‘BUY’,” said Nuvama.

YES Securities

In its report, the brokerage mentioned that the performance of 2QFY25 was slightly lower than their estimate, mainly due to the Tea and Salt core businesses. The price adjustments for the salt portfolio were already put into effect in Oct’24. To increase market share, the company has gradually raised prices in the tea portfolio.

The impact of further price changes in the tea business on margins is an important factor to monitor, especially considering the actions of competitors. Despite the challenging environment, the company remains focused on implementing its strategic priorities.

“We thus remain fundamentally optimistic and upgrade our rating to BUY with a revised target price of ₹1,325 ( ₹1,280 earlier),” said the brokerage.

Technical Views

According to Ameya Ranadive CMT CFTe, Sr Technical Analyst, StoxBox, Tata Consumer Products witnessed a sharp drop of over 9% in intraday trading following the release of its weaker-than-expected Q2 earnings. The company’s total income fell by 2.97% to ₹4,260.42 crore, raising concerns over its future growth prospects.

On the technical front, the stock breached its key support level of ₹1,040, which had held firm since early 2024. This breakdown was accompanied by a significant rise in trading volumes—six times the daily average—indicating heavy selling pressure.

Currently, the stock remains in a no-trade zone, and investors are advised to remain cautious. A strong breakout above ₹1,045 with sustained momentum could offer a buying opportunity for long-term investors, but until then, the overall outlook remains bearish

Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decision.