Tata Coffee - 1Q results - YES Securities

Weak results and cautious outlook - a negative read through for both CCL Products and Tata Consumer

- Muted results from Tata Coffee might result in some cool off post a sharp upswing in addition to impacting the earnings of parent company Tata Consumer. Peers like CCL Products might also see some correction post the recent run-up given the near-term headwinds for instant coffee industry on both demand and margins.

- Consolidated revenue was down 9% yoy mainly due to a decline in Eight O'Clock (EOC) revenues which did not have pantry loading benefits seen in base quarter. Margins were down 190bps to 16.9% due to inferior sales mix in favor of instant coffee export business, which led to a 23% decline in PAT to Rs 472mn.

- On the revenue front, plantations revenue was down 17% and EOC revenue was down 15% in USD terms, offset to some extent by a 14% growth in instant coffee exports in both India and Vietnam despite the impact of logistics issues and pandemic impact in some markets.

- While standalone business saw a 30bps margin expansion to 9% led by higher tea and pepper profitability, margins in subsidiaries contracted by 250bps to 8.8% due to higher sales from Vietnam.

- Management highlighted near term volume and margin headwinds for instant coffee business with OOH coffee demand impacted coupled with inflation in input and freight costs.

Shares of TATA COFFEE LTD. was last trading in BSE at Rs. 211.8 as compared to the previous close of Rs. 211.4. The total number of shares traded during the day was 523217 in over 6635 trades.

The stock hit an intraday high of Rs. 218.05 and intraday low of 209.85. The net turnover during the day was Rs. 112276530.

Source : Equity Bulls

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