ICICI Direct's research report on Tata Global Beverages
Consolidated sales increased 5.2% YoY to Rs 1,897.1 crore, mainly driven by 26% growth in the non-branded business. The tea business reported moderate growth of 4% whereas the coffee business declined 3%. On the volume front, India tea business reported healthy growth of 8%. Operating margins witnessed a slight improvement of 16 bps to 14%. Gross margins declined 134 bps due to high commodity costs as the company procured additional inventory prior to halt in auction between January-March 2019. Moreover, the company witnessed down-trading during the quarter with higher volumes from mass category brands.
Outlook
Hence, we value TGBL on an SOTP basis, valuing India domestic business at 4x FY21E sales, international business (US, UK, Canada) at 0.5x FY21E sales and Starbucks JV at 2x FY21E sales We reiterate our BUY rating on the stock with a revised target price of Rs 300 per share.
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