EUR 120.00 For Business Accounts Only

MOSL: TATA GLOBAL BEVERAGES (Buy)-Overseas Tea contains overall growth

Tata Global Beverages: Overseas Tea contains overall growth

(TGBL IN, Mkt Cap USD3.4b, CMP INR380, TP INR439, 16% Upside, Buy)

 

Miss on EBITDA/PAT

• TGB’s performance was below our expectations, mainly due to lower-than-expected EBITDA at TGB overseas tea and TGB standalone (primarily because of higher ad spend). However, the gross margin expanded 140bp YoY to 46.2%. Consol. PAT increased 21% YoY to INR1.2b.
• While revenue was largely in line, EBITDA/PAT came in 11%/28% below our estimates. Accordingly, we cut our PAT estimate by 10% for FY20 but largely maintain it for FY21/22. Maintain Buy. 

TGB standalone and Tata Coffee drive consol. performance

• revenue increased 3% YoY to INR19.6b (our estimate: INR20.6b), led by volume growth of 5% YoY. EBITDA was up 22% YoY at INR2.4b (our estimate: INR2.7b).
• TGB standalone revenue increased 5% YoY to INR9.3b due to 7% YoY volume growth (6% branded value growth). EBITDA margin expanded 100bp YoY to 13.8%; it is to be noted that company incurred higher ad spends during the quarter (8.4% v/s 6.1% in 3QFY19).
• Tata Coffee consol. revenue/EBITDA increased 8%/54% YoY to INR5b/INR851m. Volumes were up 14% YoY with domestic instant coffee volumes at 2,052MT (fifth straight quarter of over 2,000MT in volumes).
• TGB overseas tea revenue/EBITDA declined 5%/4% YoY. Volumes were down 1% YoY.