Bull of the Day: Stock that rose 27% in 3 days

Tata Coffee BSE | NSE 30/05/12 Are Mutual Funds betting on Tata Coffee? Other Stocks in this news Tata Global Beverage | Mcleod Russel (India) | Bombay Burmah Trading Corporation | Dhunseri Petrochem & Tea | Assam Company (India) | Jayshree Tea and Industries | CCL Products India | Gillanders Arbuthnot & Co | Harrisons Malyalam |

By: Vishwanath R, Rakesh Patil/Moneycontrol.com

Riding on the back of its agreement with Starbucks, Tata Coffee touched a 52-week high of Rs 666.80. It touched an intraday high of Rs 666.80 and an intraday low of Rs 562. The share gained 6.97% or Rs 38.75 to end at Rs 594.45 on the NSE. There were pending buy orders of 4,821 shares, with no sellers available. The total traded volumes were of 4,575,389 shares. The share has risen 27.03% in three trading sessions.

On January 13, Starbucks Corp, the world's largest coffee chain, has signed a MoU for strategic alliance with Tata Coffee, to explore the possibility of opening retail stores in India.

According to RK Krishna Kumar, Director of Tata Sons and Chairman of Tata Coffee, the first Starbucks stores would be rolled out in the next six month's time.

The Seattle-based chain expects India to be an important source for coffee in the domestic market, as well as across the many regions globally where Starbucks has operations.

Under the terms of the agreement, Starbucks and Tata Coffee will consider jointly investing in additional facilities and roasting green coffee for export to other markets. India, which is the fifth largest producer of coffee in the world exports 70 to 80% of its coffee output.

Starbucks sees the burgeoning Indian middle class and an urban population with westernised tastes embracing the cafe's, and turning from a largely tea drinking nation to a country providing coffee houses the space to carve their own niche.

Also read:  Starbucks to enter India, inks pact with Tata Coffee

What analyst says:

SP Tulsian of sptulsian.com feels it is not prudent to enter Tata Coffee at current levels with valuations being rich. Tulsian said, "I have been following Tata Coffee. But I don't think that you deserve a valuation of Rs 669. It seems more a case of over exuberance in the stock because they have an in-principle arrangement with Starbucks. But there is no clarity that they will be joint venture partners in marketing. They will be supplying and that will fetch them extra realisation and even Starbucks will be open to sourcing coffee from other suppliers as well. So definitely Tata Coffee will be in an advantageous position."

He further added, "But it should not be presumed that right now Tata Coffee is not able to market their product. But I don't think that this warrants an upside or maybe about 45% in just two days. So sometimes we see the exuberance when comes in, people enter at the higher levels and in fact this shows the steep fall also and at that time they look for exit. So this will not be a prudent move to make a fresh buy at these levels. My view is or my advice is that those who are holding, can even go for profit booking also because taking all this contract and benefits and everything into consideration with a six-month view, I don't think that valuation of over Rs 600 is justified for the stock."

Peer comparison:

Company	Last Price (Rs)	Market Cap (Rs in Cr)	Sales Turnover  (Rs in Cr)	PAT  (Rs in Cr)
Tata Global Bev	104.9	6487	1715.61	391.47
Mcleod Rus	213.1	2332.5	1107.17	240.33
Tata Coffee	593.35	1108.2	335.51	31.99
Bombay Burmah	480.35	670.3	313.31	13.66
Dhunseri Petro	174.1	609.92	1153.05	89.05
Assam Company	18.8	582.35	25.13	-18.83
Jayshree Tea	176.95	395.46	409.52	61.7
CCL Products	259.55	345.27	286.84	27.12
Gillanders Arbu	108.6	231.78	617.51	25.36
Harrisons Malay	89	164.25	330.47	9.91