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Tata Global Beverages 3QFY2013 performance highlights and results update

Contributed by Angel Broking

For 3QFY2013, Tata Global Beverages (TGBL) posted a 15.3% yoy growth in its bottom-line aided by superior operating performance. We maintain our Neutral view on the stock.

Key highlights: TGBL posted a 6.1% yoy growth in top-line to Rs.1,902cr aided by favourable foreign currency translation impact, and was in-line with our estimates. The tea business posted a 9.3% yoy growth in top-line to Rs.1,421cr, aided by a strong performance, both in India as well as in other markets such as Canada and Australia. The coffee business posted a marginal 1.2% yoy decline in its sales to Rs.481cr. Despite a lower top-line, the coffee business posted a 20.1% yoy growth in its profits, aided by lower raw material costs and lower expenditure on advertisement. TGBL’s OPM rose by 26bp on a yoy basis to 10% aided by selective price hikes and 238bp yoy decline in advertisement expenditure/sales ratio.

Outlook and valuation: TGBL derives ~65% of its revenue from overseas operations. While the company is expected to perform well in the South Asian, Canada and Australian markets, the prolonged slowdown in Europe is a concern. Over FY2012-14, we expect the company to post a CAGR of 10.2% and 22.7% in its top-line and bottom-line, respectively. At the current market price, the stock is trading at 17.9x FY2014E earnings. We maintain our Neutral view on the stock.