Why Tata Consumer Share Price Fell By 9 Percent Today

Tata Consumer shares experience a sharp decline after disappointing Q2 results.

Shares of Tata Consumer Products Ltd. plunged by 9% on Monday, October 21, 2024, making it the top loser on the Nifty 50 index.

The steep drop followed the release of its September quarter (Q2) financial results, which were announced after market hours on Friday.

This marks the stock’s biggest decline since February 2022, driven by weaker-than-expected performance across key business segments.

Why PNC Infratech Share Price Hit Lower Circuit Today

Tata Consumer Share Performance

Tata Consumer’s Q2 results revealed a 3% drop in revenue for its India beverage business, coupled with a 4% decline in volumes compared to the same period last year.

The company’s tea segment, a major part of its portfolio, lost 20 basis points in market share due to soft demand.

This underperformance in the core beverage sector has contributed significantly to the stock’s downward movement.

The ready-to-drink segment also reported a notable 11% year-on-year decline in revenue, which the company attributed to unfavorable weather conditions and tough competition.

On a more positive note, Tata Consumer’s growth business posted a 15% organic increase, but this was below analysts’ expectations, who had projected 30% growth for the quarter.

In the food business, organic revenue grew by 9%, but volume growth was sluggish at just 1%.

Despite these challenges, the company mentioned that its Tea business was beginning to see benefits from its recent acquisitions of Capital Foods and Organic India, both of which have contributed positively to its overall performance.

Market Trends Of Tata Consumer Share

Tata Consumer’s disappointing Q2 results come at a time when broader market conditions are challenging for consumer goods companies.

Slower demand in the beverage and ready-to-drink categories highlights industry-wide trends, where consumer sentiment has been impacted by economic uncertainty and inflationary pressures.

The company’s strong international business performance helped partially offset its domestic challenges.

Margins in its international operations rose significantly to 15% from 10.1% a year earlier, signaling that its global business remains robust.

Recent acquisitions have also performed well. Capital Foods reported a 25% sequential growth, while Organic India grew by an impressive 45% during the quarter.

Expert Insights On Tata Consumer Share

Analysts have mixed views on Tata Consumer’s prospects following its Q2 results. Goldman Sachs maintained a “neutral” rating on the stock, setting a price target of ₹1,050.

However, the firm has lowered its earnings per share (EPS) estimates for the company by 10% to 14%, citing weaker-than-expected performance in key segments.

Morgan Stanley, on the other hand, remains “Overweight” on Tata Consumer but has reduced its price target from ₹1,344 to ₹1,273.

The brokerage noted that while rural demand is gradually recovering, urban consumption has softened, and market share will likely remain the company’s focus over margins in the near term.

Of the 29 analysts tracking Tata Consumer Products, 22 have issued a “buy” recommendation, six suggest holding the stock, and one has downgraded it to “sell.”

Conclusion

Tata Consumer Products’ 9% share price drop reflects the market’s disappointment with its Q2 performance, particularly in the beverage and ready-to-drink segments.

Although the company’s international business and recent acquisitions performed well, weak demand in core segments has overshadowed these positives.

Analysts remain divided on the stock’s outlook, but the company’s ability to navigate through these challenges will be closely watched by investors in the coming quarters.

Shares are currently trading at ₹992.3, marking a loss for 2024 after today’s decline.