Tata Consumer Q3 preview: Higher margins will help net profit, but revenue growth is expected to be sluggish

Tata Consumer Q3 preview: Higher margins will help net profit, but revenue growth is expected to be sluggish

Tata Consumer Q3 preview: Higher margins will help net profit, but revenue growth is expected to be sluggish

Experts predict that solid margin expansion would lead to a significant increase in net profit for Tata Consumer in the third quarter of the current fiscal year.

Q3FY24 has probably seen a slowdown in the FMCG industry due to pricing increases during the previous several quarters.

It is anticipated that Tata Consumer Ltd. would have single-digit revenue growth in Q3FY24 as a result of its tea business's lackluster volume and pricing development. Nonetheless, a robust increase in net profit is anticipated for the firm as a result of robust margin development, according to a research by brokerage analysts.

On February 7, Tata Consumer is expected to release its Q3FY24 financial results.

Brokerage estimates predict that the FMCG giant would see a 7.4% year-over-year increase in sales in its fiscal third quarter, to Rs 3,731 crore, and a 25.6% year-over-year increase in net profit in the October–December quarter, to Rs 343 crore.

In Q3FY24, the earnings before interest, tax, depreciation, and amortization (EBITDA) margin is expected to increase by 160 basis points on an annual basis, or 14.7%. EBITDA margin is expected to increase sequentially by 27 basis points.

The company's domestic tea business is anticipated to rise during the quarter at a rate of 2.5 percent in volume terms and 4.5 percent in value terms, according to Kotak Institutional Equities. It is anticipated that Tata Consumer's Nourishco and Indian food businesses would grow by 35% and 15%, respectively, year over year.

Third-quarter FMCG sector

According to Prabhudas Lilladher, demand was impacted by flash floods in several regions and rising inflation during the quarter that ended in December, which put pressure on the rural recovery. Additionally, it said that there was less demand than anticipated for the holiday season around that time. Nonetheless, the brokerage business said that there were indications of recovery and that urban demand remained resilient in the October-December quarter.

Yes Securities said that, after a period of growing prices, the FMCG industry is anticipated to see price reductions in certain situations as well as a period of stagnation in Q3FY24. In order to compete with smaller regional businesses and pass on the benefits of commodity inflation to customers, FMCG firms lower their pricing.

The brokerage company said that businesses would continue to spend heavily on advertising in the October through December quarter due to healthy gross margin levels and modest demand growth.