Jan 31, 2014 ... For 3QFY2014 Tata Global Beverages (TGBL) posted a 49% yoy growth in its
bottom-line to `120cr, aided by tax credit of `46cr arising out of ...
3QFY2014 Result Update | FMCG January 31, 2014
Tata Global Beverages
NEUTRAL
Performance Highlights
CMP Target Price
Quarterly results - Consolidated (` cr) Y/E March Revenue EBITDA
Reported PAT
Investment Period
3QFY14
3QFY13
% yoy
2QFY14
% qoq
2,054
1,902
8.0
1,906
7.7
169
190
(10.7)
131
29.7
8.2
10.0
(172)bp
6.9
140bp
120
80
49.0
180
(33.6)
OPM (%)
`141 -
Source: Company, Angel Research
-
Stock Info Sector
FMCG
Market Cap (` cr)
8,698
Net Debt (` cr)
498
Beta
0.9
52 Week High / Low
170/122
For 3QFY2014 Tata Global Beverages (TGBL) posted a 49% yoy growth in its
Avg. Daily Volume
356,245
bottom-line to `120cr, aided by tax credit of `46cr arising out of stake sale in
Face Value (`)
a US based beverage company. We maintain our Neutral view on the stock.
BSE Sensex
Key highlights: For 3QFY2014 TGBL’s performance was below estimates. The
company posted an 8% yoy growth in its top-line to `2,054cr aided by good performance in some key markets and favorable foreign exchange translation impact. Its tea business posted a top-line growth of 11.1% yoy, while the coffee business posted a growth of 2% yoy. The OPM came in below estimates and stood at 8.2% (vs our estimate of 9.5%). During the quarter, the company’s profitability was affected by higher investment behind brands and new initiatives. While the tea business posted a 16.6% yoy growth in its profits, the coffee business posted a 47% yoy de-growth in profits. TGBL’s adjusted PAT was down 6% yoy and stood at `87cr. Outlook and valuation: We expect TGBL to post a CAGR of 8.9% and 11.4% in its top-line and bottom-line respectively, over FY2013-15E. At the current market price, the stock is trading at 17.4x FY2015E earnings. We maintain our Neutral
1 20,498
Nifty
6,074
Reuters Code
TGBL.BO
Bloomberg Code
TGBL@IN
Shareholding Pattern (%) Promoters
35.1
MF / Banks / Indian Fls
15.3
FII / NRIs / OCBs
23.0
Indian Public / Others
26.7
Abs. (%) Sensex TGBL
3m
1yr
3yr
(2.5)
2.5
11.4
(2.3)
40.7
(14.7)
view on the stock.
Key Financials (Consolidated) Y/E March (` cr)
FY2012
FY2013
FY2014E
FY2015E
6,585
7,270
7,761
8,615
% chg
10.1
10.4
6.7
11.0
Net Profit
333
402
442
499
% chg
36.0
20.7
10.1
12.8
EBITDA (%)
8.8
9.5
9.1
9.5
EPS (`)
5.4
6.5
7.2
8.1
P/E (x)
26.1
21.7
19.7
17.4
1.9
1.8
1.7
1.6
Net Sales
P/BV (x) RoE (%)
7.9
7.8
10.8
9.1
RoCE (%)
7.1
8.1
7.9
8.8
EV/Sales (x)
1.3
1.2
1.0
0.9
14.5
12.8
11.8
10.0
EV/EBITDA (x)
Source: Company, Angel Research: Note: CMP as of January 30, 2014
Please refer to important disclosures at the end of this report
V Srinivasan 022-39357800
[email protected]
1
TGBL | 3QFY2014 Result Update
Exhibit 1: Quarterly performance (Consolidated) Y/E March (` cr) Net Sales
3QFY14
3QFY13
% chg (yoy)
2QFY14
% chg (qoq)
9MFY2014
9MFY2013
% chg
2,054
1,902
8.0
1,906
7.7
5,756
5,458
5.5
3.6
2.3
Consumption of RM
964
930
(% of Sales)
46.9
48.9
Staff Costs
205
188
(% of Sales)
10.0
9.9
Other Expenses
715
595
(% of Sales)
9.5
944
2.1
2,795
2,732
49.5
(5.2)
48.5
50.1
201
2.3
593
538
10.5
(5.0)
10.3
9.9
20.3
631
13.3
1,879
1,686
10.2 11.4
34.8
31.3
33.1
5.2
32.6
30.9
Total Expenditure
1,884
1,712
10.1
1,776
6.1
5,266
4,956
6.3
Operating Profit
169.4
189.7
(10.7)
130.6
29.7
490
501
(2.3)
OPM
8.2
10.0
(172)bp
6.9
140bp
8.5
9.2
(67)bp
27.8
23.8
16.6
18.1
53.3
66
56
18.4
Depreciation & Amortisation
32
25
30.8
31
2.4
92
75
23.8
Other Income
42
31
35.6
60
(29.8)
137
114
20.2
Recurring PBT
151
172
(12.1)
141
7.6
468
485
(3.4)
100.5
(28.4)
(13.7)
233
(40.7)
569
456
12.2
(44.9)
9.9
8.4
72
(84.2)
145
136
Interest
Extraordinary Income/(Exp.)
(13)
(12)
PBT after Extra-ordinary items
138
160
92
(% of Sales)
6.7
8.4
Provision for Taxation
11
67
(% of PBT)
8.3
41.9
31.0
25.6
29.9
Minority Interest
19.0
18.0
(15.4)
18.6
53.2
Profit/( Loss) from Associates
11.8
5.3
4.1
6.7
10.5
Reported PAT
120
80
180
411
277
(83.0)
24.6 6.8
Source: Company, Angel Research
Exhibit 2: 3QFY2014 Actual vs Angel estimates (` cr)
Actual
Angel Est
% Diff
Revenue
2,054
2,057
(0.1)
8.2
9.5
(120)bp
120
101
18.7
OPM (%) Reported PAT Source: Company, Angel Research
January 31, 2014
2
TGBL | 3QFY2014 Result Update
Top-line growth at 8% yoy For 3QFY2014, the company posted an 8% yoy growth in its top-line to `2,054cr aided by good performance in some key markets and favorable foreign exchange translation impact. The tea business posted a top-line growth of 11.1% yoy, while the coffee business posted a growth of 2% yoy. During the quarter, TGBL launched a slew of green tea related offerings in various countries. The company launched Tetley 100% steamed green teas in Canada in three variants, namely - pure, lemon and ginger. In the USA, the company launched Tetley Black and Green Tea which offer the full flavor of black and green tea in one cup. In India too the company has recently begun its marketing and advertising campaign for Tetley green tea. Tata Starbucks the JV between TGBL and Starbucks opened its first store in Bangalore during 3QFY2014. In all, the JV has a total of 34 stores in India.
Exhibit 3: Top-line performance 2,200
20.0 18.0 16.0
2,000
14.0 (%)
10.0 8.0 1,843
1,902
1,811
1,796
1,906
2,054
6.0 1,715
1,600
1,724
(` cr)
12.0 1,800
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4.0 2.0 0.0
1,400 Top-line (LHS)
yoy growth (RHS)
Source: Company, Angel Research
OPM down 172bp yoy TGBL’s gross margin rose by 198bp yoy in 3QFY2014 to 53.1%. Its OPM came in below estimates and stood at 8.3% (vs our estimate of 9.5%). During the quarter, the company’s profitability was affected by higher investment behind brands and new initiatives. While the tea business posted a 16.6% yoy growth in profits, the coffee business posted a 47% yoy de-growth in profits. The reported PAT rose by 49% yoy to `120cr, aided by a tax credit of `46cr arising out of stake sale in a US based beverage company. However, the adjusted PAT was down 6% yoy and stood at `87cr.
January 31, 2014
3
TGBL | 3QFY2014 Result Update
Exhibit 4: Segmental performance Y/E March (` cr)
3QFY14
3QFY13
%chg yoy
2QFY14
%chg qoq
9MFY14
9MFY13
% chg
1,573
1,416
11.1
491
482
2.0
1,370
14.8
4,261
3,961
7.6
540
(9.0)
1500
1487
0.8
16
14
19.1
23
(30.7)
67
53
26.3
Sales Tea Coffee and Other Produce Others Unallocated Net Income from operations
0
0
(12.5)
3
(97.7)
0
0
(69.7)
2,081
1,911
8.9
1,936
7.5
5,828
5,501
5.9
194
108
79.1
122
59.4
462
409
13.0
38
84
(55.1)
60
(37.1)
182
218
(16.4)
EBIT Tea Coffee and Other Produce Others Total
(9)
(9)
0.0
(6)
0.0
(29)
(29)
0.0
223
184
21.2
176
26.8
615
597
3.0
12.3
7.7
8.9
10.8
10.3
7.7
17.5
11.1
12.1
14.6
(57.6)
(65.7)
(27.2)
(42.5)
(54.4)
EBIT (%) Tea Coffee and Other Produce Others Source: Company, Angel Research
Exhibit 5: OPM performance 12 10
10
10
9.9
8
10.2
10.6
8.2
7.8
(%)
6.9 6 4 2 0 4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
Source: Company, Angel Research
January 31, 2014
4
TGBL | 3QFY2014 Result Update
Investment rationale
Growth opportunity: TGBL holds a strong growth potential with increasing consumption of healthy beverages in India and globally. Acquisitions and strategic partnerships with global beverage giants like PepsiCo and Starbucks offer a huge market potential for TGBL, as it can develop and market products in local as well as global markets. Tata Starbucks the JV between TGBL and Starbucks currently has 34 stores in the country. Through its JV with Pepsico, TGBL has also entered the water business. It has launched two brands - Tata Gluco Plus and Tata Water Plus - in select cities in India.
Focus on branded products to lead to healthy margins: TGBL has shifted its focus from plantation activities to branded beverages. In the long run this is expected to lead to rationalization in TGBL’s operating cost structure, thus leading to healthy operating margins for it. While TGBL’s focus on volume growth remains intact, selective price increases and stable ad spends will further aid in margin improvement.
Outlook and valuation We expect TGBL to post a CAGR of 8.9% and 11.4% in its top-line and bottom-line respectively over FY2013-15E. At the current market price, the stock is trading at 17.4x FY2015E earnings. We maintain our Neutral view on the stock.
Exhibit 6: One-year forward PE 50.0 45.0 40.0 35.0 30.0 25.0 20.0 15.0 10.0 5.0 Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14
-
Source: Bloomberg, Angel Research; Note: Blue line represents 5-yr average
January 31, 2014
5
TGBL | 3QFY2014 Result Update
Exhibit 7: Peer valuation Company
Reco
Market
CMP
TP
Upside
Cap
(`)
(`)
(%)
FY14E
P/E (x) FY15E
FY14E
EV/Sales (x) FY15E
FY14E
RoE (%) FY15E
Sales
CAGR# PAT
479
-
-
36.8
30.5
3.6
3.0
33.4
32.5
15.6
16.2 43.2
Asian Paints
Neutral
45,907
Britannia
Acc
10,376
868
945
9
25.8
21.7
1.5
1.3
51.5
43.4
14.8
Colgate
Neutral
17,638
1,297
-
-
34.8
29.8
4.7
4.1
94.9
92.9
16.2
9.0
Dabur India
Neutral
29,587
170
-
-
32.0
27.0
4.2
3.6
39.0
36.8
15.0
19.5
Godrej Con
Neutral
24,320
715
-
-
31.0
25.2
3.3
2.8
23.1
23.7
19.3
16.4
GSK Con
Neutral
17,784
4,229
-
-
35.2
28.2
4.4
3.7
33.8
34.3
17.6
21.9
HUL
Neutral
123,360
570
-
-
33.7
31.4
4.3
3.8
109.8
83.7
10.6
11.0
ITC
Buy
256,453
325
382
18
29.1
25.2
7.2
6.2
35.8
34.0
14.0
17.2
Marico
Buy
13,672
212
254
20
30.5
24.6
2.8
2.4
20.6
21.1
9.5
23.7
Nestle
Neutral
47,755
4,953
-
-
41.6
33.8
5.1
4.3
55.0
50.2
12.9
13.3
TGBL
Neutral
8,698
141
-
-
19.7
17.4
1.0
0.9
10.8
9.1
8.9
11.4
Source: Angel Research; # CAGR over FY2013-15E
Company background TGBL has a strong portfolio of global and regional brands such as Tata Tea, Tetley, Eight O’Clock Coffee, Good Earth, Jemca, Grand Vitax and Himalayan. During the past decade, TGBL has made acquisitions in various countries in the tea, coffee, water and other beverages categories. Tea constitutes more than 70% of the company’s total turnover, coffee accounts for ~26%, and the rest is accounted by other activities. About 65% of the company’s sales are from outside India, ie from countries such as the US, UK, Czech Republic and Poland.
January 31, 2014
6
TGBL | 3QFY2014 Result Update
Profit & Loss Statement (Consolidated) Y/E March (` cr) Total operating income % chg
FY10
FY11
FY12
FY13
FY14E
FY15E
5,783
5,982
6,585
7,270
7,761
8,615
19.3
3.4
10.1
10.4
6.7
11.0
Total Expenditure
5,269
5,395
6,009
6,582
7,055
7,801
Cost of Materials
2,310
2,928
3,323
3,567
3,780
4,238
Advertising Exp
1,317
1,013
1,100
1,221
1,397
1,221
611
615
675
740
784
861
Others
1,031
840
911
1,054
1,094
1,480
EBITDA
514
587
576
688
706
814
(17.7)
14.4
(1.9)
19.4
2.6
15.3
8.9
9.8
8.8
9.5
9.1
9.5
103
99
96
105
122
135
Personnel
% chg (% of Net Sales) Depreciation& Amortisation EBIT
411
488
480
583
585
679
(21.9)
18.8
(1.6)
21.4
0.3
16.2
7.1
8.2
7.3
8.0
7.5
7.9
Interest & other Charges
149
121
70
84
90
83
Other Income
379
118
140
167
178
184
(% of PBT)
59.2
24.3
25.5
25.0
26.5
23.6
-
-
-
-
-
-
Recurring PBT
641
485
550
666
673
780
% chg
20.7
(24.3)
13.5
21.0
1.1
15.8
8
10
23
(28)
114
-
PBT (reported)
649
494
573
638
787
780
Tax
248
202
142
164
168
214
(% of PBT)
38.6
41.7
25.7
24.6
25.0
27.5
PAT (Adjusted)
393
283
409
502
505
565
33
20
(15)
(28)
10
15
% chg (% of Net Sales)
Share in profit of Associates
Prior Period & Extr. Exp./(Inc.)
Add: Share of earnings of asso. Less: Minority interest (MI) Adj. PAT after MI (reported) % chg Reported PAT
36
58
61
72
73
81
390
245
333
402
442
499
-
(37)
36
21
10
13
399
254
355
373
556
499
(% of Net Sales)
6.9
4.3
5.4
5.1
7.2
5.8
Basic EPS (`)
6.3
4.0
5.4
6.5
7.2
8.1
Fully Diluted EPS (`)
6.3
4.0
5.4
6.5
7.2
8.1
% chg
0.0
(37.4)
35.7
20.7
10.1
12.8
Note: Some of the figures from FY2011 onwards are reclassified; hence not comparable with previous year numbers
January 31, 2014
7
TGBL | 3QFY2014 Result Update
Balance Sheet (Consolidated) Y/E March (` cr)
FY10
FY11
FY12
FY13
FY14E
FY15E
SOURCES OF FUNDS Equity Share Capital
62
62
62
62
62
62
Preference Capital
-
-
-
-
-
-
Reserves& Surplus
3,662
3,895
4,504
4,748
5,124
5,466
Shareholders’ Funds
3,723
3,957
4,566
4,810
5,186
5,527
Minority Interest
1,057
1,108
1,066
814
814
814
Total Loans
1,797
1,041
916
1,325
1,225
1,125
75
64
66
54
66
66
88
174
174
174
174
Deferred Tax Liability Long term Provisions Other long term liablities Total Liabilities
164
156
156
156
156
6,652
6,423
6,943
7,333
7,620
7,862
APPLICATION OF FUNDS Gross Block
1,470
1,538
1,731
1,867
2,026
2,249
Less: Acc. Depreciation
752
842
956
1,031
1,152
1,287
Net Block
718
697
775
836
874
962
47
44
49
91
51
56
2,929
3,062
3,469
3,598
3,598
3,598
519
591
600
578
745
769
91
86
86
86
86
Capital Work-in-Progress Goodwill Investments Long term loans and adv. Current Assets
3,998
3,280
3,300
3,605
3,840
4,081
Cash
1,904
997
736
698
942
950
653
717
820
876
915
915
Other
1,441
1,565
1,744
2,031
1,983
2,216
Current liabilities
1,560
1,342
1,336
1,461
1,573
1,690
Net Current Assets
2,438
1,938
1,964
2,144
2,267
2,391
-
-
-
-
-
-
6,652
6,423
6,943
7,333
7,620
7,862
Loans & Advances
Mis. Exp. not written off Total Assets
Note: Some of the figures from FY2011 onwards are reclassified; hence not comparable with previous year numbers
January 31, 2014
8
TGBL | 3QFY2014 Result Update
Cash Flow Statement (Consolidated) Y/E March (` cr)
FY10
FY11
FY12
FY13
FY14E
FY15E
Profit before tax
641
485
550
666
673
780
Depreciation
103
99
96
105
122
135
Change in Working Capital
42
(284)
(69)
(236)
37
(234)
Interest / Dividend (Net)
91
45
2
(4)
1
(0)
Direct taxes paid Others
248
202
142
164
168
214
(326)
(125)
(232)
(39)
(38)
(38)
Cash Flow from Operations
303
18
205
328
627
427
(Inc.)/ Dec. in Fixed Assets
(89)
(85)
(198)
(178)
(119)
(228)
(Inc.)/ Dec. in Investments
1,472
5
(10)
22
(167)
(24)
Cash Flow from Investing
1,384
(81)
(208)
(155)
(286)
(253)
-
(63)
0.1
(0)
-
-
Issue of Equity Inc./(Dec.) in loans
(634)
(591)
(134)
410
(100)
(100)
Dividend Paid (Incl. Tax)
146
145
123
119
119
119
Interest / Dividend (Net)
91
45
2
(4)
1
(0)
(871)
(845)
(259)
295
(220)
(219)
815
(907)
(261)
468
121
(44)
Opening Cash balances
1,089
1,904
997
736
698
942
Closing Cash balances
1,904
997
736
698
942
950
Cash Flow from Financing Inc./(Dec.) in Cash
Note: Some of the figures from FY2011 onwards are reclassified; hence not comparable with previous year numbers
January 31, 2014
9
TGBL | 3QFY2014 Result Update
Key Ratios Y/E March
FY10
FY11
FY12
FY13
FY14E
FY15E
P/E (on FDEPS)
22.2
35.5
26.1
21.7
19.7
17.4
P/CEPS
17.3
24.5
19.3
18.2
12.8
13.7
P/BV
2.4
2.2
1.9
1.8
1.7
1.6
Dividend yield (%)
1.4
1.4
1.5
1.5
1.5
1.5
EV/Sales
1.4
1.4
1.3
1.2
1.0
0.9
15.7
14.0
14.5
12.8
11.8
10.0
1.2
1.3
1.2
1.2
1.1
1.1
EPS (Basic)
6.3
4.0
5.4
6.5
7.2
8.1
EPS (fully diluted)
6.3
4.0
5.4
6.5
7.2
8.1
Cash EPS
8.1
5.7
7.3
7.7
11.0
10.2
DPS
2.0
2.0
2.1
2.2
2.2
2.2
59.6
63.4
73.1
77.1
83.1
88.7
6.2
7.7
7.1
8.1
7.9
8.8
Valuation Ratio (x)
EV/EBITDA EV / Total Assets Per Share Data (`)
Book Value Returns (%) RoCE Angel ROIC (Pre-tax)
-
-
-
-
-
-
10.8
6.5
7.9
7.8
10.8
9.1
Asset Turnover (Gross Block)
4.1
4.0
3.9
4.0
3.9
3.9
Inventory / Sales (days)
53
61
62
64
63
59
Receivables (days)
31
33
34
34
35
35
Payables (days)
83
74
59
55
56
55
WC cycle (ex-cash) (days)
76
45
60
67
65
59
RoE Turnover ratios (x)
Note: Some of the figures from FY2011 onwards are reclassified; hence not comparable with previous year numbers
January 31, 2014
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TGBL | 3QFY2014 Result Update
Research Team Tel: 022 - 39357800
E-mail:
[email protected]
Website: www.angelbroking.com
DISCLAIMER This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and risks of such an investment. Angel Broking Pvt. Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this document are those of the analyst, and the company may or may not subscribe to all the views expressed within. Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's fundamentals. The information in this document has been printed on the basis of publicly available information, internal data and other reliable sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this document is for general guidance only. Angel Broking Pvt. Limited or any of its affiliates/ group companies shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Angel Broking Pvt. Limited has not independently verified all the information contained within this document. Accordingly, we cannot testify, nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. While Angel Broking Pvt. Limited endeavours to update on a reasonable basis the information discussed in this material, there may be regulatory, compliance, or other reasons that prevent us from doing so. This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced, redistributed or passed on, directly or indirectly. Angel Broking Pvt. Limited and its affiliates may seek to provide or have engaged in providing corporate finance, investment banking or other advisory services in a merger or specific transaction to the companies referred to in this report, as on the date of this report or in the past. Neither Angel Broking Pvt. Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in connection with the use of this information. Note: Please refer to the important `Stock Holding Disclosure' report on the Angel website (Research Section). Also, please refer to the latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Pvt. Limited and its affiliates may have investment positions in the stocks recommended in this report.
Disclosure of Interest Statement 1. Analyst ownership of the stock
Tata Global Beverages No
2. Angel and its Group companies ownership of the stock
No
3. Angel and its Group companies' Directors ownership of the stock
No
4. Broking relationship with company covered
No
Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors
Ratings (Returns):
January 31, 2014
Buy (> 15%) Reduce (-5% to -15%)
Accumulate (5% to 15%) Sell (< -15%)
Neutral (-5 to 5%)
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