Tata Global Beverages - 4QFY2012 Result Update - Angel Broking

For 4QFY2012, Tata Global Beverages (TGBL) posted strong 220% yoy growth in its consolidated adjusted net profit, aided by reduction in interest costs due to repayment of debts and lower tax rate. During the quarter, the company had exceptional expenses of Rs.40cr related to cost incurred for long-term initiatives and new projects, and loss on assets related to discontinued business initiatives (vs. exceptional gain of Rs.56cr in 4QFY2011), among others. We continue to maintain our Buy view on the stock.

Key highlights: During 4QFY2012, TGBL posted 10.7% yoy growth in its net sales to Rs.1,724cr, aided by improved performance in most of its major markets coupled with foreign exchange translation impact. The company posted a strong performance in India, maintaining its volume and value market leadership. In all, the company posted 8.6% top-line growth in its South Asian operations. TGBL's OPM for the quarter stood at 10.3%, up 70bp yoy. Even on a sequential basis, OPM expanded by 57bp.

Outlook and valuation: Despite its leadership position in the Indian packaged tea market, No. 2 position in the global tea market and generating ~90% of its total revenue from branded products, TGBL is trading at 14.1x FY2014E EPS (which is at a discount to its FMCG peers that are trading at 20-30x FY2014E EPS). Also, on EV/Sales basis, the stock is trading at 0.8x FY2014E EV/Sales (historical average of 1x EV/ Sales). Hence, we maintain our Buy rating on the stock with a target price of Rs.136.

Source : Equity Bulls

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