Tata Global Beverages - 1QFY2013 Result Update - Angel Broking

For 1QFY2013, Tata Global Beverages (TGBL) posted a flat performance on the bottomline front. On a positive note, the company reported a 223bp yoy (165bp qoq) improvement in OPMs aided by better realization and softening of certain raw materials.

Key highlights: During 1QFY2013, TGBL posted 17.8% yoy growth in its net sales to Rs.1,715cr, aided by improved performance in most of its major markets coupled with foreign exchange translation impact. In all, the company posted 12% yoy top-line growth in its South Asian operations, due to both volume and value increases and maintained its market leadership in the region. The company's gross margin rose by 237bp yoy to 49.5%, aided by better realization and reduction in prices of some of the raw materials. While the prices of tea remains volatile, coffee prices have reduced from the earlier high levels.

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 16.2x 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 0.9x FY2014E EV/Sales (historical average of 1x EV/ Sales). Hence, we assign Accumulate rating on the stock with a target price of Rs.136.

Source : Equity Bulls

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