Tata Global Beverages 4Q FY 2013

7/28/2019 Tata Global Beverages 4Q FY 2013

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Please refer to important disclosures at the end of this report 1

Quarterly results - Consolidated

(` cr) Y/E March 4QFY13 4QFY12 % yoy 3QFY13 % qoqRevenue 1,811 1,724 5.0 1,902 (4.8)EBITDA 185 173 7.0 190 (2.6)

OPM (%) 10.2 10.0 18bp 10.0 23bp

PAT 95 94 1.7 92 3.2Source: Company, Angel Research

For 4QFY2013, Tata Global Beverages (TGBL) posted a 7% yoy growth in its

operating profit. We maintain our Neutral view on the stock.Key highlights: TGBL posted a 5.0% yoy growth in its top-line to `1,811cr for4QFY2013, which is in line with our estimates. The top-line growth was aided by

an improved operational performance in its South Asian operations and a

favorable foreign currency translation impact.The tea business posted a 6.9% yoy

growth in top-line to `1,367cr, aided by a strong performance in the Indian and

Australian markets. The coffee business posted a 5.8% yoy growth in sales to

`460cr.The OPM rose marginally by 18bp yoy to 10.2%, aided by a 246bp yoy

increase in gross margins. While the tea business posted a 7.7% yoy growth in its

profits, the coffee business posted a 38.6% yoy growth in profits, aided by a

significant increase in profits in the United States.

Outlook and valuation: TGBL derives ~65% of its revenue from overseasoperations.We expect the company to perform well in its South Asian, Canadianand Australian markets. Over FY2013-15, we expect the company to post a

CAGR of 11.0% and 14.6% in its top-line and bottom-line, respectively. At thecurrent market price, the stock is trading at 17.0x FY2015E earnings. Wemaintain our Neutral view on the stock.Key Financials (Consolidated)Y/E March (` cr) FY2012 FY2013 FY2014E FY2015ENet Sales 6,585 7,270 8,070 8,958% chg 10.1 10.4 11.0 11.0

Net Profit 333 402 484 531% chg 36.0 20.7 20.4 9.7

EBITDA (%) 8.8 9.5 9.8 9.7

EPS (`) 5.4 6.5 7.8 8.6P/E (x) 27.1 22.4 18.6 17.0

P/BV (x) 2.0 1.9 1.8 1.6

RoE (%) 7.9 7.8 9.5 9.7

RoCE (%) 7.1 8.6 9.6 10.1

EV/Sales (x) 1.3 1.2 1.1 1.0

EV/EBITDA (x) 15.0 12.7 11.0 9.9

Source: Company, Angel Research

NEUTRALCMP `146

Target Price -

Investment Period -

Stock Info

Sector

Net Debt (`cr) 410

Bloomberg Code TGBL@IN

Shareholding Pattern (%)

Promoters 35.2

MF / Banks / Indian Fls 18.4

FII / NRIs / OCBs 19.6

Indian Public / Others 26.8

Abs. (%) 3m 1yr 3yr

Sensex 4.8 21.1 16.6

TGBL 16.4 35.6 34.1

FMCG

Market Cap (`cr) 9,007

Beta 0.9

52 Week High / Low 182/103

Avg. Daily Volume 427,157

Face Value (`) 1

BSE Sensex 19,760

Nifty 5,986

Reuters Code TGBL.BO

V Srinivasan022-39357800

[email protected]

Tata Global BeveragesPerformance Highlights

4QFY2013 Result Update | FMCG

May 31, 2013


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TGBL | 4QFY2013 Result Update

May 31, 2013 2

Exhibit 1:Quarterly performance (Consolidated)

Y/E March (` cr) 4QFY13 4QFY12 % chg (yoy) 3QFY13 % chg (qoq) FY2013 FY2012 % chgNet Sales 1,811 1,724 5.0 1,902 (4.8) 7,270 6,585 10.4Consumption of RM 835 837 (0.3) 930 (10.3) 3,567 3,321 7.4(% of Sales) 46.1 48.5 48.9 (5.8) 49.1 50.4

Staff Costs 202 185 9.1 188 7.9 740 681 8.6

(% of Sales) 11.2 10.8 9.9 13.3 10.2 10.3

Other Expenses 589 529 11.4 595 (0.9) 2,275 2,014 13.0

(% of Sales) 32.5 30.7 31.3 4.1 31.3 30.6

Total Expenditure 1,626 1,551 4.8 1,712 (5.0) 6,582 6,017 9.4Operating Profit 184.7 172.7 7.0 189.7 (2.6) 688 568 21.0OPM 10.2 10.0 18bp 10.0 23bp 9.5 8.6 83bp

Interest 28.5 14.3 99.7 23.8 19.4 84 70 20.0

Depreciation & Amortisation 30 25 20.7 25 23.9 105 96 9.3

Other Income 55 33 63.4 31 77.4 167 149 11.6

Recurring PBT 180 167 8.3 172 4.9 665 551 20.7Extraordinary Income/(Expense) 1 (40) 12 (28.2) 22.5

PBT after Extra-ordinary items 181 127 42.3 184 (1.7) 637 574 11.0(% of Sales) 10.0 7.4 9.7 3.2 8.8 8.7

Provision for Taxation 28 29 (3.8) 67 (58.5) 164 142 15.8

(% of PBT) 15.4 22.8 36.4 25.8 24.7

Minority Interest 19.2 24.2 18.0 72.3 60.7

Profit/ Loss from Associates (38.2) (19.7) 5.3 (27.7) (15.1)

Recurring PAT 95 94 1.7 92 3.2 401 334 20.2PATM 5 5 5 6 5

Equity shares (cr) 62 62 62 62 62

EPS (`) 1.5 1.5 1.7 1.5 3.2 6.5 5.4 20.2Source: Company, Angel Research

Exhibit 2:4QFY2013 Actual vs Angel estimates

(` cr) Actual Angel Est % DiffRevenue 1,811 1,812 (0.1)OPM (%) 10.2 7.4 275bp

PAT 95 98 (2.8)Source: Company, Angel Research


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Top-line grows 5.0% yoy

TGBL posted a 5.0% yoy growth in its net sales to `1,811cr, aided by improved

performance in some of its markets coupled with favorable foreign exchange

translation impact.

South Asia: TGBL posted a strong performance in this region, maintaining itsvolume and value market leadership with a share of 20.5% and 22%, respectively.

All in all, the company posted a 21% top-line growth in its South Asian operations

for the quarter. The company carried out price increases during the quarter to

counter increase in tea prices.

USA: TGBLs operations in the USA, carried out through subsidiary - Eight OClock Coffee, reportedan 8.4% yoy growth in sales to `363cr. However, moreimportantly, the profitability improved considerably due to lower green coffee

costs and good buying strategy.

Australia: In the Australian market, there was an all-round improvement inperformance. The growth came from key consumers and new products launched.

Exhibit 3:Top-line performance


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58

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(%

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(`cr)

Top-line (LHS) yoy growth (RHS)


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Exhibit 4:Region-wise sales performance

4QFY13 4QFY12 %chg yoy 3QFY13 %chg qoq FY13 FY12 % chgUSA 363 335 8.4 352 3.1 1,453 1,352 7.5

Canada, South America and Australia 135 156 (13.5) 181 (25.4) 558 499 11.8

GB & Africa 434 429 1.2 393 10.4 1,606 1,468 9.4

Europe and Middle East 183 191 (4.2) 204 (10.3) 737 763 (3.4)

South Asia 534 442 20.8 588 (9.2) 2,176 1,887 15.3

Others 20 10 100.0 13 53.8 55 29 89.7

Branded Operations 1,669 1,563 6.8 1,731 (3.6) 6,585 5,998 9.8Non-Branded operations 148 159 (6.9) 167 (11.4) 680 583 16.6

Others and eliminations 33 17 94.1 17 94.1 86 59 45.8

Total Operating Income 1,850 1,739 6.4 1,916 (3.4) 7,351 6,640 10.7Source: Company, Angel Research

Exhibit 5:Segmental performanceY/E March (` cr) 4QFY13 4QFY12 %chg yoy 3QFY13 %chg qoq FY13 FY12 % chgSalesTea 1,367 1,278 6.9 1,420 (3.8) 5,328 4,808 10.8

Coffee and Other Produce 460 434 5.8 482 (4.6) 1947 1766 10.2

Others 23 26 (10.0) 14 72.8 76 65 16.2

Unallocated 0 0 (33.3) 0 0.0 0 0 127.8

Net Income from operations 1,849 1,739 6.4 1,916 (3.4) 7,351 6,640 10.7EBITTea 178 166 7.7 146 21.8 544 507 7.5

Coffee and Other Produce 71 52 38.6 71 0.5 289 196 47.5

Others (5) (6) 0.0 (10) 0.0 (26) (19) 0.0

Total 245 211 16.1 208 18.1 808 683 18.2EBIT (%)Tea 13.0 13.0 10.3 10.2 10.5

Coffee and Other Produce 15.5 11.9 14.7 14.9 11.1

Others (19.9) (22.7) (73.7) (33.7) (29.4)


OPM at 10.2%TGBLs OPM rose marginally by 18bp yoy to 10.2%, aided by 246bp yoy increase

in gross margins. While the tea business posted a 7.7% yoy growth in its profits,

the coffee business posted a 38.6% yoy growth in profits aided by significant

increase in profits in United States.During the quarter, the companys interest and

depreciation costs rose by 99.7% and 20.7% respectively. The profitability was also

impacted by`38cr of loss from associate companies (vs `20cr loss in 4QFY2012).

The other income was higher by 64% on a yoy basis. Thus, despite a 7% yoy

increase in operating profit, the recurring PAT rose only marginally by 1.7%.


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Exhibit 6:OPM performance


Investment rationale

Growth opportunity: TGBL holds a strong growth potential with increasingconsumption 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. The TGBL Starbucks JV recently

inaugurated the first store of Starbucks Coffee Tata Alliance in Mumbai. The

JV plans to scale up its operations quickly going ahead. 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. The

initial response to the water brands has been encouraging with Tata Water

Plus becoming the largest selling bottled water company in Chennai.

Focus on branded products to lead to healthy margins: TGBL has shifted itsfocus from plantation activities to branded beverages. In the long run this is

expected to lead to rationalization in TGBLs operating cost structure, thus

leading to healthy operating margins for it. While TGBLs focus on volume

growth remains intact, selective price increases and stable ad spends will

further aid in margin improvement.

Outlook and valuation

TGBL derives ~65% of its revenue from overseas operations. We expect thecompany to perform well in the South Asian, Canadian and Australian markets.

Over FY2013-15, we expect the company to post a CAGR of 11.0% and 14.6% in

its top-line and bottom-line, respectively. At the current market price, the stock istrading at 17.0x FY2015E earnings. We maintain our Neutral view on the stock.

10.7

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3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13

(%)


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Exhibit 7:One-year forward PE

Source: Bloomberg, Angel Research; Note: Blue line represents 3-yr average

Exhibit 8:Peervaluation

Company Reco Mcap CMP TP P/E (x) EV/Sales (x) RoE (%) CAGR #(` cr) (`) (`) FY14E FY15E FY14E FY15E FY14E FY15E Sales EPS

Asian Paints Neutral 46,657 4,864 - 34.4 29.9 3.6 3.0 35.4 32.2 15.4 18.4

Britannia Neutral 8,651 724 - 31.3 25.9 1.3 1.1 38.3 36.4 16.1 20.7

Colgate Neutral 19,767 1,454 - 32.9 28.1 5.3 4.6 108.6 96.2 15.7 19.0

Dabur Neutral 27,246 157 - 29.1 24.9 3.7 3.2 41.5 40.1 16.5 19.5

GCPL Neutral 29,419 865 - 34.4 29.1 3.9 3.3 24.8 24.2 18.8 18.9

GSKCHL* Neutral 24,484 5,822 - 47.6 39.2 6.3 5.2 34.1 33.7 17.6 19.6HUL Neutral 128,128 593 - 34.7 32.2 4.2 3.7 113.4 87.0 14.7 11.7

ITC Neutral 268,543 340 - 30.1 25.5 7.4 6.2 36.1 34.9 16.2 19.2

Marico Neutral 15,181 235 - 32.4 27.2 2.9 2.4 21.4 21.0 14.8 24.0

Nestle* Neutral 51,256 5,316 - 41.7 34.5 5.4 4.5 57.7 50.7 14.9 16.2

TGBL Neutral 9,007 146 - 18.6 17.0 1.1 1.0 9.5 9.7 11.0 14.6Source: Company, Angel research; Note: # Denotes CAGR over FY2013-15E, *December Year Ending.

Company background

TGBL has a strong portfolio of global and regional brands such as Tata Tea,

Tetley, Eight OClock 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 companys total turnover, coffee accounts for ~26%, and the rest is

accounted by other activities. About 65% of the companys sales are from outside

India, ie from countries such as the US, UK, Czech Republic and Poland.

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Profit & Loss Statement (Consolidated)

Y/E March (` cr) FY10 FY11 FY12 FY13 FY14E FY15ENet Sales 5,783 5,982 6,585 7,270 8,069 8,957Total operating income 5,783 5,982 6,585 7,270 8,069 8,957% chg 19.3 3.4 10.1 10.4 11.0 11.0

Total Expenditure 5,269 5,395 6,009 6,582 7,279 8,089

Cost of Materials 2,310 2,928 3,323 3,567 3,962 4,416

Advertising Exp 1,317 1,013 1,100 1,221 1,372 1,221

Personnel 611 615 675 740 807 896

Others 1,031 840 911 1,054 1,138 1,556

EBITDA 514 587 576 688 790 868% chg (17.7) 14.4 (1.9) 19.4 14.8 9.9

(% of Net Sales) 8.9 9.8 8.8 9.5 9.8 9.7

Depreciation& Amortisation 103 99 96 105 116 129

EBIT 411 488 480 583 674 739% chg (21.9) 18.8 (1.6) 21.4 15.6 9.7

(% of Net Sales) 7.1 8.2 7.3 8.0 8.4 8.3

Interest & other Charges 149 121 70 84 71 64

Other Income 379 118 140 167 127 130

(% of PBT) 59.2 24.3 25.5 25.0 17.4 16.1

Share in profit of Associates - - - - - -

Recurring PBT 641 485 550 666 730 806% chg 20.7 (24.3) 13.5 21.0 9.7 10.3

Prior Period & Extr. Exp./(Inc.) 8 10 23 (28) - -

PBT (reported) 649 494 573 638 730 806Tax 248 202 142 164 201 222

(% of PBT) 38.6 41.7 25.7 24.6 27.5 27.5

PAT (Adjusted) 393 283 409 502 529 584Add: Share of earnings of asso. 33 20 (15) (28) 30 30

Less: Minority interest (MI) 36 58 61 72 76 84

Adj. PAT after MI (reported) 390 245 333 402 483 530% chg - (37) 36 21 20 10Reported PAT 399 254 355 373 483 530(% of Net Sales) 6.9 4.3 5.4 5.1 6.0 5.9

Basic EPS (`) 6.3 4.0 5.4 6.5 7.8 8.6Fully Diluted EPS ( ) 6.3 4.0 5.4 6.5 7.8 8.6% chg 0.0 (37.4) 35.7 20.7 20.4 9.7

Note: Some of the figures from FY2011 onwards are reclassified; hence not comparable with

previous year numbers


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May 31, 2013 8

Balance Sheet (Consolidated)

Y/E March (` cr) FY10 FY11 FY12 FY13E FY14E FY15ESOURCES OF FUNDSEquity Share Capital - 62 62 62 62 62Preference Capital - - - - - -

Reserves& Surplus 3,662 3,895 4,504 4,748 5,075 5,449

Shareholders Funds 3,723 3,957 4,566 4,810 5,137 5,511Minority Interest 1,057 1,108 1,066 814 814 814

Total Loans 1,797 1,041 916 953 853 753

Deferred Tax Liability 75 64 66 54 66 66

Long term Provisions 88 174 174 174 174

Other long term liablities 164 156 156 156 156

Total Liabilities 6,652 6,423 6,943 6,961 7,200 7,473APPLICATION OF FUNDSGross Block 1,470 1,538 1,731 1,941 2,107 2,339

Less: Acc. Depreciation 752 842 956 1,061 1,177 1,306

Net Block 718 697 775 879 930 1,033Capital Work-in-Progress 47 44 49 47 53 58

Goodwill 2,929 3,062 3,469 3,598 3,598 3,598

Investments 519 591 600 578 703 730Long term loans and adv. 91 86 86 86 86

Current Assets 3,998 3,280 3,300 3,605 3,465 3,719

Cash 1,904 997 736 698 494 510

Loans & Advances 653 717 820 876 901 901

Other 1,441 1,565 1,744 2,031 2,070 2,308

Current liabilities 1,560 1,342 1,336 1,833 1,635 1,751

Net Current Assets 2,438 1,938 1,964 1,772 1,830 1,968Mis. Exp. not written off - - - - - -

Total Assets 6,652 6,423 6,943 6,961 7,200 7,473Note: Some of the figures from FY2011 onwards are reclassified; hence not comparable with



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May 31, 2013 9

Cash Flow Statement (Consolidated)

Y/E March (` cr) FY10 FY11 FY12 FY13E FY14E FY15EProfit before tax 641 485 550 666 731 807

Depreciation 103 99 96 105 116 129Change in Working Capital 42 (284) (69) 103 (377) (231)

Interest / Dividend (Net) 91 45 2 (4) 22 12

Direct taxes paid 248 202 142 164 201 222

Others (326) (125) (232) (39) (38) (38)

Cash Flow from Operations 303 18 205 667 254 457(Inc.)/ Dec. in Fixed Assets (89) (85) (198) (208) (171) (238)

(Inc.)/ Dec. in Investments 1,472 5 (10) 22 (125) (27)

Cash Flow from Investing 1,384 (81) (208) (186) (296) (265)Issue of Equity - (63) 0.1 - - -

Inc./(Dec.) in loans (634) (591) (134) 38 (100) (100)

Dividend Paid (Incl. Tax) 146 145 123 119 119 119

Interest / Dividend (Net) 91 45 2 (4) 22 12

Cash Flow from Financing (871) (845) (259) (77) (241) (231)Inc./(Dec.) in Cash 815 (907) (261) 404 (284) (39)

Opening Cash balances 1,089 1,904 997 736 698 494Closing Cash balances 1,904 997 736 698 494 510Note: Some of the figures from FY2011 onwards are reclassified; hence not comparable with



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Key Ratios

Y/E March FY10 FY11 FY12 FY13 FY14E FY15EValuation Ratio (x)P/E (on FDEPS) 23.0 36.7 27.1 22.4 18.6 17.0P/CEPS 17.9 25.4 19.9 18.8 15.0 13.7

P/BV 2.4 2.3 2.0 1.9 1.8 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 1.1 1.0

EV/EBITDA 16.3 14.5 15.0 12.7 11.0 9.9

EV / Total Assets 1.3 1.3 1.3 1.3 1.2 1.2

Per Share Data (`)EPS (Basic) 6.3 4.0 5.4 6.5 7.8 8.6

EPS (fully diluted) 6.3 4.0 5.4 6.5 7.8 8.6

Cash EPS 8.1 5.7 7.3 7.7 9.7 10.7

DPS 2.0 2.0 2.1 2.2 2.2 2.2

Book Value 59.6 63.4 73.1 77.1 82.4 88.4

Returns (%)RoCE 6.2 7.7 7.1 8.6 9.6 10.1

Angel ROIC (Pre-tax) - - - - - -

RoE 10.8 6.5 7.9 7.8 9.5 9.7

Turnover ratios (x)Asset Turnover (Gross Block) 4.1 4.0 3.9 3.8 3.9 3.9

Inventory / Sales (days) 53 61 62 64 62 59

Receivables (days) 31 33 34 34 35 35

Payables (days) 83 74 59 64 63 54

WC cycle (ex-cash) (days) 76 45 60 58 55 57

Note: Some of the figures from FY2011 onwards are reclassified; hence not comparable with



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May 31 2013 11

Research Team Tel: 022 - 39357800 E-mail: [email protected] Website: www.angelbroking.com

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Disclosure of Interest Statement Tata Global Beverages

1. Analyst ownership of the stock 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

Ratings (Returns): Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%)Reduce (-5% to -15%) Sell (< -15%)

Note: We have not considered any Exposure below `1 lakh for Angel, its Group companies and Directors

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Tata Global Beverages 4Q FY 2013

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