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Tata Consumer - Q1 FY22 result first cut - YES Securities

Posted On: 2021-08-04 15:44:53 (Time Zone: UTC)

In-line earnings with higher tea realizations and volume growth in foods offset by weak international growth and tea profitability

- Result summary - Revenue/EBITTDA/PAT growth of 11%/-17.2%/-27.7% on consol basis. Revenue growth led by 28% growth in India business and 20% in Foods while International business reported revenue decline of 13% on the back of pantry loading effect in base quarter. Total branded business registered revenue growth of 11.5%. Margins lower sharply due to sheer inflation in tea and coffee prices.

- Standalone performance - Revenue growth of 22.5% on a strong base of 10% led by volume growth of 3% and strong value growth in branded tea business. Gross margin nosedived 610bps led by higher commodity costs. EBITDA de-grew 16% on gross margin dip while PAT grew 20% driven by higher other income partially offset by higher tax rate.

- Segmental performance - India beverages business revenue growth of 28.2% with margin contraction of 960bps to 11.9%, India foods business revenue growth of 19.6% with margin contraction of 580bps to 13.6%, International beverages revenue decline 12.7% with margin fell from 14.6% to 12.5%.

- Consol Margins - Gross margin plunged 390bps helped by lower margin contraction from International business while tea and coffee prices continue put pressure on Indian branded business gross margin. The effect of gross margin dip percolated to EBITDA margin which stood at 13.3% vs 17.8% in Q1FY21 as employee and other expenses remain at same levels.

- Earnings - PAT decline of 27.7% led by higher tax, lower other income and higher interest expense.

- India Business - Packaged beverage business recorded 24%/3% value/volume growth impacted by 2nd covid wave ingress. Wellness portfolio strengthened by scale up and expansion of Tata tea gold in AP, Telangana and Karnataka. Tata tea gold care launched in TN. India foods business 17%/20% volume/value growth while Tata salt continue to gain market share.

- International Business - Tetley gained share in UK with its Herbal range, launched Good earth in Uk, Teapigs saw robust revenue growth, launched Teapigs Kombucha in a can format and Teapigs cold brew- natural infusions, also launched Himalayan mineral water brand in UK.

- Our view - While we await more details on the results call scheduled tomorrow, the current performance was mixed on expected lines. Market share gains in tea and salt in addition to decent recovery in Nourishco and Starbucks were positives, but margin headwinds in tea business and growth challenges in international business remain dampeners. Post the recent run-up, we don't expect further re-rating in the stock for now and see returns in-line with the earnings growth trajectory of the business.

Shares of TATA CONSUMER PRODUCTS LIMITED was last trading in BSE at Rs. 760.5 as compared to the previous close of Rs. 767.35. The total number of shares traded during the day was 327045 in over 5004 trades.

The stock hit an intraday high of Rs. 769 and intraday low of 755.4. The net turnover during the day was Rs. 248388073.

Source: Equity Bulls

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