1
Aug 30, 2016
Tata Global Beverages Ltd
India Research - Stock Broking
HOLD
Stock Performance (%)
1M 3M 6M 12M
Absolute 7 15 31 22
Relative to Sensex 6 4 8 12
Source: Bloomberg
Relative Performance*
Source: Bloomberg; *Index 100
Analyst Contact
Ashok Ramineni
040 - 3321 6271
ashok.ramineni@karvy.com
On the Recovery Path
TGBL reported good performance during the quarter with improvement in topline,
Operating prot margins and the bottomline. Total Operating Income increased by
3.7% to Rs. 17342 Mn, Operating prots improved by 32.6% to Rs. 2595 Mn and
net prots improved by 51.9% to Rs. 1195 mn.
The group has organised it’s business into Branded Segment and Non-Branded
Segment. Maintaining of volumes and marginal growth in its major markets of India
and UK Tea branded businesses; and good topline growth in USA Coee branded
segment led to growth in total revenue and improvement in operating prot margins.
It continued to maintain its market share in Canada and stable performance in
rest of EMEA (Europe, Middle East and Africa). Pressure in volume growth seen
in the last few quarters continued in some developed markets. Stable operating
prots in Tea branded business and jump in prot margins in the non-branded
business led to signicant jump in EBITDA margins by 326 bps. Operating prots
in the coee branded business also improved well. The competitive intensity in the
developed market, the major markets for TGB has continued. The JV businesses
with Starbucks and Nourishco have reported subtle growth. Starbucks JV has
reported good topline growth with good store-level protability and Tata Gluco Plus
in Nourishco JV has reported double digit growth.
Valuation:
The weak growth in black tea market and low pricing power because of higher
competition in the developed markets putting pressure on topline and bottomline
growth. This is expected to continue but part of this weak growth is expected to be
compensated by double digit growth from Green and other specialty tea; but lower
base of these businesses would take few more quarters to improve the bottomline.
In the long run, TGBLs investment on water and coee brands in India and the
various promotion strategies in its key markets-UK, Canada, US and Australia along
with growth from domestic market where the management is taking aggressive
strategies are likely to support growth in the long run.
We have revised the total revenue and EBITDA margins factoring the expected
lower growth in topline and bottomline. We roll out FY18E estimates and assign 5
year average PE multiple of 22.0x to FY18E EPS, and give “HOLD” rating for an
upwardly revised target price of Rs. 150, representing an upside potential of 8%.
For private circulation only. For important information about Karvy’s rating system and other disclosures refer
to the end of this material. Karvy Stock Broking Research is also available on Bloomberg, KRVY<GO>,
Thomson Publishers & Reuters
Earnings Revision (%)
YE Mar FY17E
Sales (%) 0.0
EBITDA (%) 2.2
PAT (%) (1.5)
Source: Karvy Research
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Company Update
Consumer Staples - Consumer Products - Beverages
Tata Global Beverages Ltd
Bloomberg Code: TGBL IN
Recommendation (Rs.)
Initiation Price 134
CMP (as on Aug 29, 2016) 139
Target Price 150
Previous Target Price 135
Upside (%) 8
Stock Information
Mkt Cap (Rs.mn/US$ mn) 88516 / 1319
52-wk High/Low (Rs.) 150 / 100
3M Avg. daily volume (mn) 2.2
Beta (x) 1.1
Sensex/Nifty 27902 / 8607
O/S Shares(mn) 631.1
Face Value (Rs.) 1.0
Shareholding Pattern (%)
Promoters 35.7
FIIs 13.8
DIIs 20.8
Others 29.6
80
93
105
118
130
Sep-15
Oct-15
Nov-15
Dec-15
Jan-16
Feb-16
Mar -16
Apr-16
May-16
Jun-16
Jul-16
Aug -16
Tata Global Beverag es Ltd
Sensex
Exhibit 1: Valuation Summary (Rs. Mn)
YE Mar FY14 FY15 FY16 FY17E FY18E
Net Sales 77376 79934 81105 85105 89374
EBITDA 8337 8448 7453 8559 9402
EBITDA Margin (%) 10.7 10.5 9.1 10.0 10.4
Adj. Net Prot 4805 2478 3173 4062 4539
EPS (Rs.) 7.8 3.9 5.0 6.4 7.2
RoE (%) 8.2 4.5 5.5 6.8 7.3
PE (x) 19.3 34.0 24.1 21.6 19.3
Source: Company, Karvy Research; *Represents multiples for FY14, FY15 & FY16 are based on historic market price
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Aug 30, 2016
Tata Global Beverages Ltd
Exhibit 2: Q1FY17
YE Mar (Rs. Mn) Q1FY17 Q1FY16 YoY (%) Q4FY16
Net Sales 17342 16722 3.7 19656
EBITDA 2595 1957 32.6 1818
EBITDA Margin (%) 15.0 11.7 326 bps 9.2
Depreciation 363 296 22.4 339
EBIT 2233 1661 34.4 1479
Interest expenses 220 212 4.1 182
Prot before tax 1995 1421 40.4 1597
Total tax provision 732 562 30.4 519
Net Prot 1263 860 46.9 1079
Net prot after minority Interest 1195 787 51.9 1065
EPS (Rs.) 1.9 1.2 51.9 1.7
Source: Company, Karvy Research
Exhibit 3: Financials
YE Mar
FY17E FY18E (Introducing)
Old New % Change New
Net Sales (Rs. Mn) 85105 85105 0.0 89374
EBITDA (Rs. Mn) 8372 8559 2.2 9402
EBITDA Margin (%) 9.7 10.0 30 bps 10.4
Adj. PAT (Rs.) 4069 4062 (0.2) 4539
EPS (Rs.) 6.5 6.4 (1.5) 7.2
Source: Company, Karvy Research
The non-branded tea mainly comprises of Instant coee & Tea and Income from Plantations. Change in volume improvement
and change in product mix in the instant coee segment with more focus on high margin Instant coee products led to growth
in the non-branded segment operating prot margins. The plantation segment continued to report stable performance with
improved volume sales.
On the raw materials font, in the domestic market the softness in Tea prices is seen whereas the Tea prices in Kenya market
declined. The weakness in Tea prices continued and the coee costs are also decreased. In the short term because of Hedging,
the eect on earning due to forex changes is muted; however it could have some potential long term implications. Currency
translation impact on topline and balance sheet are taken into account.
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Aug 30, 2016
Tata Global Beverages Ltd
Financials
Exhibit 4: Income Statement
YE Mar (Rs. Mn) FY14 FY15 FY16 FY17E FY18E
Revenues 77376 79934 81105 85105 89374
Growth (%) 5.1 3.3 1.5 4.9 5.0
Operating Expenses 69857 72185 74359 77394 80922
EBITDA 8337 8448 7453 8559 9402
EBITDA Margin (%) 10.7 10.5 9.1 10.0 10.4
Depreciation & Amortization 1317 1358 1429 1430 1508
Other Income 818 700 706 847 950
EBIT 7046 7117 6023 7129 7894
Interest Expenses 865 819 688 419 429
PBT 7069 4999 5454 6709 7464
Tax 1845 2155 2104 2387 2655
Adjusted PAT 4805 2478 3173 4062 4539
Growth (%) 28.9 (48.4) 28.0 28.0 11.7
Source: Company, Karvy Research
Exhibit 5: Balance Sheet
YE Mar (Rs. Mn) FY14 FY15 FY16 FY17E FY18E
Cash & Investments 7283 5485 5475 5525 5999
Sundry Debtors 6544 6161 6321 7570 8480
Inventory 15185 16253 17281 16711 16839
Loans & Advances 10261 8918 14286 9912 10525
Others 7437 8071 8410 8530 8656
Net Block 51810 49217 48491 50003 50096
CWIP 594 470 439 0 0
Total Assets 99984 95118 96177 98673 101018
Current Liabilities & Provisions 13919 14159 17734 18728 19389
Debt 14013 12660 7986 6486 4986
Deferred Tax liabilites & LT provisions 4322 4610 4462 4845 4925
Total Liabilities 32255 31428 30181 30059 29300
Shareholders Equity 618 618 631 631 631
Reserves & Surplus 57870 54297 56558 58915 61750
Total Networth 58489 54915 57189 59546 62381
Minority Interest 9241 8762 8807 9067 9337
Total Networth & Liabilities 99984 95118 96177 98673 101018
Source: Company, Karvy Research
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Aug 30, 2016
Tata Global Beverages Ltd
Exhibit 6: Cash Flow Statement
YE Mar (Rs. Mn) FY14 FY15 FY16 FY17E FY18E
PBT 7069 4999 5454 6709 7464
Depreciation 1291 1331 1429 1430 1508
Interest 865 819 688 419 429
Tax Paid (2548) (1686) (2469) (2082) (2655)
Inc/dec in Net WC 84 (1320) (2776) (1079) (996)
Other Income (641) (520) (435) (847) (950)
Cash ow from operating activities 4218 4178 1115 4629 4881
Inc/dec in capital expenditure (2037) (1792) (1662) (1600) (1600)
Inc/dec in investments 0 (725) 862 0 0
Cash ow from investing activities (1204) (1748) 2932 (869) (772)
Inc/dec in borrowings (4219) (1809) (804) (1500) (1500)
Dividend paid (1876) (1793) (1871) (1705) (1705)
Interest paid (863) (820) (656) (419) (429)
Cash ow from nancing activities (3632) (3924) (4290) (3625) (3634)
Net change in cash (619) (1494) (243) 135 474
Source: Company, Karvy Research
Exhibit 7: Key Ratios
YE Mar FY14 FY15 FY16 FY17E FY18E
EBITDA Margin (%) 10.7 10.5 9.1 10.0 10.4
EBIT Margin (%) 9.1 8.9 7.4 8.4 8.8
Net Prot Margin (%) 6.2 3.1 3.9 4.8 5.1
Dividend Payout Ratio (%) 29.0 57.3 44.7 35.0 31.3
Net Debt/Equity (x) 0.1 0.1 0.0 0.0 0.0
RoE (%) 8.2 4.5 5.5 6.8 7.3
RoCE (%) 9.0 8.5 7.6 9.0 9.8
Source: Company, Karvy Research
Exhibit 8: Valuation Parameters
YE Mar FY14 FY15 FY16 FY17E FY18E
EPS (Rs.) 7.8 3.9 5.0 6.4 7.2
DPS (Rs.) 2.2 2.3 2.3 2.3 2.3
BVPS (Rs.) 94.6 88.8 90.6 94.4 98.9
PE (x) 19.3 34.0 24.1 21.6 19.3
P/BV (x) 1.6 1.5 1.3 1.5 1.4
EV/EBITDA (x) 11.9 10.6 10.6 9.1 8.0
EV/Sales (x) 1.3 1.1 1.0 0.9 0.8
Source: Company, Karvy Research; *Represents multiples for FY14, FY15 & FY16 are based on historic market price
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Aug 30, 2016
Tata Global Beverages Ltd
Stock Ratings
Absolute Returns
Buy : > 15%
Hold : 5-15%
Sell : <5%
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