On Tuesday, Tata Consumer Products Limited (TGBL:IN) retained its Neutral rating and INR1,030.00 price target by Goldman Sachs (NYSE:GS). The firm observed that Tata Consumer's India business experienced a slowdown in growth during the fourth quarter of fiscal year 2024 compared to previous quarters. The company's beverage segment in India grew by 3% year-over-year, while the food segment's growth slightly decelerated to 11% year-over-year.
The tea volumes remained stagnant year-over-year, with revenue growth reported at 2%. Nourishco, a segment previously witnessing robust growth of over 25% in past quarters, saw a rise of only 13%. The company indicated that the slower growth could be partially attributed to the late arrival of the summer season in India this year.
Despite the moderated growth in its India operations, Tata Consumer's consolidated earnings before interest and taxes (EBIT) for the fourth quarter of fiscal year 2024 increased by 20% year-over-year, slightly exceeding Goldman Sachs' expectations.
The growth, however, was not driven by the India branded business, which saw a modest 3% year-over-year increase in EBIT. In contrast, the EBIT for the international segment grew by 29% year-over-year, and the unbranded business saw a significant increase of 255% year-over-year.
The performance of Tata Consumer's international and unbranded business segments played a key role in the overall EBIT growth, counterbalancing the softer expansion in the India market. The company's diverse portfolio, including its international and unbranded segments, contributed to the overall financial results despite the varied growth rates across different segments.
InvestingPro Insights
While Goldman Sachs maintains a Neutral stance on Tata Consumer Products Limited (TGBL:IN), investors looking at the broader picture might find comfort in the company's financial health and dividend reliability. According to InvestingPro Tips, Tata Consumer holds more cash than debt on its balance sheet, which could provide a cushion against market volatility and ensure operational flexibility. Additionally, the company has a commendable track record of raising its dividend for 4 consecutive years, and has consistently paid dividends for 23 consecutive years, showcasing a commitment to returning value to shareholders.
InvestingPro Data highlights that Tata Consumer Products Limited is trading at a high earnings multiple, indicating that the market has high expectations for future earnings. However, this must be balanced against the company's high Price / Book multiple, suggesting that it may be valued richly in terms of its net asset value. Investors should note that analysts predict the company will be profitable this year, as it has been over the last twelve months, reinforcing the confidence in its financial performance.
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