Tata Global Beverages - 2QFY2013 Result Update - Angel Broking

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 Rs.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 company's 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.

Source : Equity Bulls

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