Tata Group Stock: Why is Nomura Bullish on Tata Consumer despite its high PE ratio?

Synopsis: Nomura remains positive on Tata Consumer Products with a Buy rating and a Rs 1,450 target, citing strong core momentum, 30% growth in high-growth segments, improving margins, and sustained double-digit sales growth despite premium valuations of 77 PE.

Tata Consumer Products Limited continues to command investor attention as Nomura reiterates its bullish stance despite rich valuations. Strong execution in core categories and fast-growing segments and improving profitability have helped the stock deliver over 100% returns in five years, reinforcing confidence in its long-term growth trajectory.

With the market cap of Rs 1,11,937 crore, the shares of Tata Consumer Products Ltd are trading at Rs 1,131 and are trading at a PE of 77.3, whereas its industry PE is at 13.8. The shares have given over 90% return in the last 5 years. 

Nomura on Tata Consumer Products 

After Nomura reconfirmed its Buy status for Tata Consumer Products Limited with a target price set to be Rs 1,450 (which would represent approximately a 28% gain), it appears this company will stay a key player. The broker has stated that the core business continues to perform strongly, while management indicates a double-digit sales increase based on stable demand.

Nomura believes that Tata’s large growth areas, contributing roughly 30% of revenue to India, have also performed strongly with 29% YoY growth and will continue to have 30% growth going forward. This has come from improvements attributable to superiorisation and innovative new products, as well as a growing presence in different distribution channels, which are all helping to create above-average growth.

Profitability is expected to continue improving, with management stating profit will grow faster than sales in the near term and operating leverage and improved product mix will provide some of the impetus for this improvement. Even though the stock currently trades at a forward P/E ratio of 48x FY28E EPS, Nomura believes that the P/E ratio is warranted based on executing well and improving profitability, as well as long-term upside growth potential.

The revenue from operations for the company stood at Rs 5,112 crores in Q3 FY26 compared to Q3 FY25 revenue of Rs 4,444 crores, up by about 15 per cent YoY. Similarly, the net profit stood at Rs 385 crore in Q3 FY26, up compared to the Rs 282 crore profit in Q3 FY25. 

Starbucks, which comes under Tata Consumer Ltd, reported impressive results for Q3 as it posted a 7% YOY revenue increase and also maintained its positive growth rate for the second straight quarter after adding 12 new stores, for a total of 504 stores operating in 81 Indian cities. 

Expanding its number of stores and entering into new formats (including its second removable store), as well as continuing with its seasonal innovations/collaborations are all examples of how Tata Starbucks continues to drive the company forward and remain the dominant player in India’s organized cafe market.

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