Tata Consumer Q1 Review: Margin Recovery Ahead? Brokerages Weigh In
Brokerages noted the resilience in core categories like tea and salt but flagged concerns over muted growth in newer businesses and margin volatility.
Tata Consumer Products Ltd. reported its first-quarter earnings for FY26 on Wednesday, posting a 15.1% rise in net profit to Rs 334 crore. While revenue grew 9.8% year-on-year to Rs 4,779 crore, the results fell short of analyst expectations, particularly on operating margins, prompting a mixed response from brokerages.
Brokerages noted the resilience in core categories like tea and salt but flagged concerns over muted growth in newer businesses and margin volatility.
Ebitda declined 9% to Rs 607 crore, and margins contracted to 12.7% from 15.3% a year earlier. Analysts had expected stronger performance, with Bloomberg consensus pegging revenue at Rs 4,813 crore and Ebitda at Rs 648 crore.
Morgan Stanley On Tata Consumer
Morgan Stanley described the Q1 results as “mixed,” noting that while revenue rose 10% year-on-year, it was 4% below its estimates. However, the brokerage pointed out that Ebitda margins of 12.7% were “above our estimate of 11.8%,” supported by lower interest costs.
The firm expects sequential improvement, “Ebitda margins to improve to normative levels by Q3, closer to 16%, led by gross margin improving to 34–37% in tea versus 24% currently.”
Morgan Stanley also highlighted segment-level trends, “Tea revenue increased 12% with just 1% volume growth, led by pricing. Salt revenue rose 13%, and the Sampann portfolio grew 27% YoY.”
It noted that growth businesses like NourishCo and Capital Foods were affected by “early rains, trade price corrections, and capacity constraints.”
On Starbucks, the brokerage said, “Revenue increased 6% YoY with positive same-store sales growth. Six net new stores were added in Q1.”
Citi On Tata Consumer
Citi termed the Q1 performance “weak,” citing a 9% decline in Ebitda despite 10% revenue growth. The brokerage noted that “growth was primarily driven by the core business in India, with double-digit pricing-led gains in tea and salt.”
However, it flagged underperformance in new categories, “The new categories, which constitute around 28% of India’s branded business, grew just 6% YoY. We will monitor the pace of recovery in NourishCo and Capital Foods.”
Citi also expressed caution on profitability, saying, “While India tea margins are likely to recover from Q3 as tea prices are down 9% YoY in July, the fall in non-branded margins is faster than anticipated.”
The brokerage revised its earnings estimates downward and said, “We cut our FY26–28 EPS estimates by 5–10%, tweaking margin assumptions lower.” It now forecasts a 10% revenue CAGR and 21% EPS CAGR over FY25–28 and revised its target price to Rs 1,275 from Rs 1,325, maintaining a “Buy” rating.
