MOSL: Morning India (20/November/19): 1. Tata Global Beverages | Initiating Coverage (Brewing a heady mix!); 2. BPCL; 3. Siemens; 4. NHPC; 6. Healthcare Monthly; 7. Financials
MOrning India (20/November/19): 1. Tata Global Beverages | Initiating Coverage (Brewing a heady mix!); 2. BPCL; 3. Siemens; 4. NHPC; 5. Healthcare; 6. Financials
Today’s top research idea
Tata Global Beverages: Brewing a heady mix!; Focus back on high-RoIC India business; Initiating with Buy
- TGB is a natural beverages company with interest in tea, coffee and water. Winds of change are blowing within TGB. Company has shifted its focus back to highly profitable India beverage business. Besides, merger of Tata Chemicals' consumer business marks its entry into an additional segment of staples.
- TGB's India tea business is its breadwinner and has clocked revenue/EBITDA CAGR of 10%/13% over the past decade, impressive for a category where the penetration is more than 90%.
- TGB's coffee is facing near-term challenges as global coffee production is outpacing demand and depressing prices. The commissioning of its Vietnam plant is expected to boost instant coffee capacity and translate into higher earnings. Starbucks (50% JV) is a premium coffee experience, an excellent play on the lifestyle aspiration of Indian consumers.
- After nearly two years, there has been re-ignition of growth in Starbucks. We expect revenue/EBITDA/PAT CAGR of 16%/28%/32% over FY19-22.
- We initiate on the stock with Buy rating and SOTP based TP of INR347/share.
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