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November 5, 2012
NEUTRAL
CMP Target Price
Investment Period
`159 -
Stock Info Sector Market Cap (` cr) Net Debt (` cr) Beta 52 Week High / Low Avg. Daily Volume Face Value (`) BSE Sensex Nifty Reuters Code Bloomberg Code FMCG 9,802 (100) 0.9 165/80 395,790 1 18,763 5,704 TGBL.BO TGBL@IN
For 2QFY2013, Tata Global Beverages (TGBL) posted a robust 54.6% yoy growth in its bottom-line due to a superior operating performance. We maintain our Neutral view on the stock. Key highlights: During 2QFY2013, TGBL posted a 14.3% yoy growth in its net sales to `1,843cr, aided by improved performance in markets such as Great Britain, Australia and also due to a favorable foreign exchange translation impact. Gross margin for the quarter stood at 49.2%, up 162bp yoy aided by decline in prices of coffee and selective price hikes taken by the company. However, tea prices remained volatile during the quarter. The companys advertising expenses as a percentage of sales too went up by 140bp during the quarter, thereby restricting the OPM expansion to 42bp yoy. The OPM for the quarter stood at 7.8%. For 2QFY2013, TGBL posted a 54.6% yoy growth in its consolidated net profit aided by a 20.9% growth in its operating profit. The bottom-line growth was also boosted by a substantially low tax rate of 13.5% for the quarter (vs 33.8% during 2QFY2012). Outlook and valuation: TGBL derives ~65% of its revenue from overseas operations. While the company is expected to perform well in the South Asian, Canada and Australian markets, the prolonged slowdown in Europe is a concern. Over FY2012-14E, we expect the company to post a CAGR of 9.7% and 16.6% in its top-line and bottom-line respectively. At the current market price, the stock is trading at 20.3x FY2014E earnings. We maintain our Neutral view on the stock.
Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 35.2 23.2 17.1 24.5
3m 9.1 21.4
FY2011 5,982 3.4 245 (37.3) 9.8 4.0 40.0 2.5 6.5 7.7 1.6 15.9
FY2012 6,585 10.1 333 36.0 8.8 5.4 29.4 2.2 7.9 7.1 1.4 16.4
FY2013E 7,207 9.4 409 22.8 9.7 6.6 24.0 2.1 8.2 8.6 1.3 13.2
FY2014E 7,927 10.0 483 18.2 10.0 7.8 20.3 1.9 9.5 9.5 1.2 11.5
V Srinivasan
022-39357800 v.srinivasan@angelbroking.com
2QFY13 1,843 937 50.8 177 9.6 586 31.8 1,700 142.8 7.8 11.0 25 52 159 11 148 8.0 20 13.5 20.7 11.7 119 6 62 1.9
2QFY12 1,612 846 52.5 160 9.9 489 30.3 1,494 118.1 7.3 19.0 23 53 129 11 118 7.3 40 33.8 10.4 9.1 77 5 62 1.2
% chg (yoy) 14.3 10.8 10.9 19.9 13.8 20.9 42bp (42.2) 10.0 (0.6) 23.3 25.1 (50.1)
1QFY13 1,715 866 50.5 173 10.1 510 29.8 1,550 165.2 9.6 21.2 25 29 148 148 8.6 49 33.2 14.5 (6.4)
% chg (qoq) 7.4 8.2 0.7 2.0 (5.1) 14.9 6.9 9.7 (13.5) (188)bp (48.3) 0.3 81.6 7.7 0.1 (6.9) (59.4)
1HFY2013 3,557 1,802 50.7 350 9.8 1,092 30.7 3,244 313 8.8 32 50 81 312 16.7 296 8.3 69 23.4 35.2 5.2
1HFY2012 3,068 1,615 52.6 315 10.3 912 29.7 2,842 226 7.4 33 47 82 228 (78.1) 306 10.0 54 17.5 18.1 3.7 238 8 62 3.8
% chg 16.0 11.6 11.3 19.7 14.2 38.6 144bp (2.4) 6.2 (1.0) 37.0 (3.4) 29.1
54.6
78 5 62
52.9
196 6 62
(17.4)
54.6
1.3
52.9
3.2
(17.4)
November 5, 2012
USA: Sales from USA operations grew by 9.5% yoy. Partnership with Keurig for K-cups kicked off during the quarter. Australia: In the Australian market, there was an all-round improvement in both,
the top-line and the bottom-line performance. Chai Latte posted a robust performance. Fruit and herbal teas too posted a strong performance. Canada: Six new variants were launched in the Canadian market. The Tata Tea brand increased retail listing. TGBL finalized an agreement with Tassimo for single serve brewing machines.
Great Britain: TGBL posted a good top-line growth in the UK market as well.
Brands such as Tetley Decaff and Tetley Redbush maintained their market leadership position. TGBL also continued to post strong growth in the fast growing green tea segment. Tea Pigs too grew by a healthy 45%. Russia: The coffee business posted a strong performance in Russia. TGBL launched Grand Malenge range of coffees in Russia.
1,374
1,448
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(` cr)
%chg yoy 9.5 45.3 15.8 (1.1) 10.0 66.7 12.7 29.1 17.6 14.2
%chg qoq 13.6 73.0 7.5 (0.6) (3.9) (16.7) 7.6 20.9 33.3 9.0
% chg 14.4 20.9 23.1 3.9 11.0 100.0 14.7 27.3 8.6 15.8
2QFY12 1,164 453 12 0 1,629 112 41 (5) 149 9.7 9.0 (38.9)
%chg yoy 12.6 18.2 25.9 (13.8) 14.2 (15.8) 106.4 0.0 15.9
1QFY13 1,230 471 24 0 1,725 125 63 (4) 183 10.2 13.3 (18.4)
%chg qoq 6.5 13.7 (38.4) 108.3 7.9 (24.2) 34.5 0.0 (5.9)
1HFY13 2,541 1006 39 0 3,586 220 147 (11) 355 8.6 14.6 (28.1)
1HFY12 2,225 844 26 0 3,096 203 86 (9) 279 9.1 10.1 (34.7)
% chg 14.2 19.1 50.8 (26.5) 15.8 8.4 71.7 0.0 27.3
November 5, 2012
November 5, 2012
Investment rationale
Growth opportunity: TGBL holds a strong growth potential with increasing consumption of healthy beverages in India and globally. Acquisitions and strategic partnerships with global beverage giants like PepsiCo and Starbucks offer a huge market potential for TGBL, as it can develop and market products in local as well as global markets. The TGBL Starbucks JV recently inaugurated the first store of Starbucks Coffee Tata Alliance in Mumbai. The JV plans to scale up its operations quickly going ahead. Through its JV with Pepsico, TGBL has also entered the water business. It has launched two brands Tata Gluco Plus and Tata Water Plus in select cities in India. The initial response to the water brands has been encouraging with Tata Water Plus becoming the largest selling bottled water in Chennai. Focus on branded products to lead to healthy margins: TGBL has shifted its focus from plantation activities to branded beverages. In the long run this is expected to lead to rationalization in its operating cost structure leading to healthy operating margins. While TGBLs focus on volume growth remains intact, selective price increases and stable ad spends will further aid in margin improvement.
Source: Bloomberg, Angel Research; Note: Blue line represents 3-yr average
November 5, 2012
CMP (`)
3,954 475 1,301 127 688 3,056 534 288 211 4,829 159
TP (`)
584 -
Upside (%)
23 -
CAGR # Sales
17.0 17.4 15.2 15.9 22.1 16.8 15.5 17.2 18.6 16.5 9.7
FY14E
27.0 18.7 30.6 24.3 26.0 23.2 31.3 26.4 24.9 34.5 20.3
FY14E
2.7 0.7 4.8 3.1 3.3 3.1 3.8 6.2 2.2 4.5 1.1
FY14E
35.3 41.9 98.5 41.4 25.4 32.8 59.8 35.3 29.7 60.3 9.5
EPS
19.2 27.4 13.8 18.9 28.3 24.9 19.7 17.7 27.6 15.0 16.6
Source: Company, Angel research; Note: # Denotes CAGR over FY2012-14E, *December Year Ending.
Company background
TGBL is a global beverage company headquartered in London. The company has a strong portfolio of global and regional brands such as Tata Tea, Tetley, Eight OClock Coffee, Good Earth, Jemca, Grand Vitax and Himalayan. During the past decade, TGBL has made acquisitions in various countries in the tea, coffee, water and other beverages categories. Tea constitutes more than 70% of the companys total turnover; coffee constitutes a ~19% share; and the rest is accounted by other activities. About 65% of the companys sales are from outside India in countries like the US, UK, Czech Republic and Poland.
November 5, 2012
FY2009 FY2010 FY2011 FY2012 FY2013E FY2014E 4,848 4,848 12.5 4,224 1,753 880 554 1,036 624 12.2 12.9 99 526 13.1 10.8 210 215 40.6 531 (74.6) 725 1,256 424 79.9 107 25 156 (25) 701 14.5 (0.4) (0.4) 0.0 5,783 5,783 19.3 5,269 2,310 1,317 611 1,031 514 (17.7) 8.9 103 411 (21.9) 7.1 149 379 59.2 641 20.7 8 649 248 38.6 393 33 36 390 399 6.9 6.3 6.3 0.0 5,982 5,982 3.4 5,395 2,928 1,013 615 840 587 14.4 9.8 99 488 18.8 8.2 121 118 24.3 485 (24.3) 10 494 202 41.7 283 20 58 245 (37) 254 4.3 4.0 4.0 (37.4) 6,585 6,585 10.1 6,009 3,323 1,100 675 911 576 (1.9) 8.8 96 480 (1.6) 7.3 70 140 25.5 550 13.5 23 573 142 25.7 409 (15) 61 333 36 355 5.4 5.4 5.4 35.7 7,207 7,207 9.4 6,508 3,596 1,153 764 995 699 21.3 9.7 105 594 23.6 8.2 68 156 22.9 682 23.9 (17) 665 184 27.0 498 (15) 74 409 23 392 5.4 6.6 6.6 22.8 7,927 7,927 10.0 7,135 3,940 1,268 840 1,086 792 13.3 10.0 116 676 13.9 8.5 61 153 20.0 768 12.7 768 184 24.0 584 (15) 87 482 18 482 6.1 7.8 7.8 18.2
Note: Some of the figures from FY2011 onwards are reclassified; hence not comparable with
November 5, 2012
FY2009 FY2010 FY2011 FY2012 FY2013E FY2014E 62 3,591 3,653 1,022 2,431 48 62 3,662 3,723 1,057 1,797 75 62 3,895 3,957 1,108 1,041 64 88 164 7,154 1,442 707 735 63 3,027 351 4,587 1,089 2,303 1,194 1,617 2,970 8 7,154 6,652 1,470 752 718 47 2,929 519 3,998 1,904 653 1,441 1,560 2,438 6,652 6,423 1,538 842 697 44 3,062 591 91 3,280 997 717 1,565 1,342 1,938 6,423 62 4,504 4,566 1,066 916 66 174 156 6,943 1,731 956 775 49 3,469 600 86 3,300 736 820 1,744 1,336 1,964 6,943 62 4,739 4,800 1,066 816 66 174 156 7,077 1,882 1,062 820 47 3,469 690 86 3,427 747 848 1,832 1,461 1,966 7,077 62 5,065 5,127 1,066 716 66 174 156 7,304 2,070 1,178 892 52 3,469 713 86 3,638 728 873 2,037 1,546 2,092 7,304
Note: Some of the figures from FY2011 onwards are reclassified; hence not comparable with
November 5, 2012
FY2009 FY2010 FY2011 FY2012 531 99 381 154 424 (1,605) (864) (68) 1,155 1,087 (178) 125 154 (457) (234) 1,323 1,089 641 103 42 91 248 (326) 303 (89) 1,472 1,384 (634) 146 91 (871) 815 1,089 1,904 485 99 (284) 45 202 (125) 18 (85) 5 (81) (63) (591) 145 45 (845) (907) 1,904 997 550 96 (69) 2 142 (232) 205 (198) (10) (208) 0.1 (134) 123 2 (259) (261) 997 736
FY2013E 682 105 (80) (20) 184 (39) 464 (149) (90) (239) (100) 119 (20) (199) 26 736 747
FY2014E 769 116 (247) (24) 184 (38) 392 (193) (23) (215) (100) 119 (24) (195) (19) 747 728
Note: Some of the figures from FY2011 onwards are reclassified; hence not comparable with
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Key Ratios
Y/E March Valuation Ratio (x) P/E (on FDEPS) P/CEPS P/BV Dividend yield (%) EV/Sales EV/EBITDA EV / Total Assets Per Share Data (`) EPS (Basic) EPS (fully diluted) Cash EPS DPS Book Value Returns (%) RoCE Angel ROIC (Pre-tax) RoE Turnover ratios (x) Asset Turnover (Gross Block) Inventory / Sales (days) Receivables (days) Payables (days) WC cycle (ex-cash) (days)
previous year numbers
FY2009 FY2010 FY2011 FY2012 FY2013E FY2014E (396.8) 47.6 2.7 1.1 2.2 17.3 1.5 (0.4) (0.4) 3.3 1.8 58.5 7.4 3.0 3.5 49 34 88 95 25.0 19.5 2.7 1.3 1.6 17.8 1.4 6.3 6.3 8.1 2.0 59.6 6.2 10.8 4.1 53 31 83 76 40.0 27.7 2.5 1.3 1.6 15.9 1.5 4.0 4.0 5.7 2.0 63.4 7.7 6.5 4.0 61 33 74 45 29.4 21.7 2.2 1.4 1.4 16.4 1.4 5.4 5.4 7.3 2.1 73.1 7.1 7.9 3.9 62 34 59 60 24.0 19.7 2.1 1.4 1.3 13.2 1.3 6.6 6.6 8.0 2.2 76.9 8.6 8.2 3.9 61 34 57 62 20.3 16.4 1.9 1.4 1.2 11.5 1.3 7.8 7.8 9.7 2.2 82.2 9.5 9.5 3.9 59 35 56 59
Note: Some of the figures from FY2011 onwards are reclassified; hence not comparable with
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E-mail: research@angelbroking.com
Website: www.angelbroking.com
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Ratings (Returns):
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