Tag - Tea

04 Feb

Entry into new categories with Soulfull acquisition – Tata consumer

Update on the Indian Equity Market:

On Thursday Nifty closed 0.7% higher at 14,896. Among the sectoral indices, PSU Banks (+5.9%), FMCG (+2.5%), and Metal (+2.0%) closed higher. IT (-0.4%) was the only sector which closed in the red. SBI (+6.6%), ITC (+6.1%), and Bajaj Finance (+5.0%) closed on a positive note. Asian Paints (-1.9%), UPL (-1.7%), and Cipla (-1.6%) were among the top losers.

Excerpts from an interview of Mr. Sunil D’souza, MD & CEO, Tata Consumer with CNBC-TV18 dated 03rd February 2021:

  • Tea prices have not started to taper off and the company is confident that proper execution will deliver good results in the future.
  • Starbucks and NourishCo Beverages are showing sequential improvement.
  • On ‘Soulfull’ acquisition, he said the Company looked at strategic and financial filters. It will help to get into new categories including snacking, breakfast.
  • This will lead to entry into new consumer occasions. The company was not previously present in these segments.
  • These new products are margin accretive products. EBITDA margins for Soulful are higher as compare to the current basket.
  • Speaking about the tea business, he said the margins are a transient issue. The company has increased its share by 90 bps (Y-0-Y).
  • The company has also integrated its distributor and digitize its system.
  • The account receivables days are down 50% from where the company started.
  • On future acquisitions, he said the company is juggling around different pieces and the announcement will be made when the company gets closer to it.
  • The gross cash of the company is around Rs 2,500 crores, the company makes judicious of the cash. The company around Rs 156 crore cash for the ‘Soulfull’ acquisition.
  • The company expects double-digit growth across financials.

 

Consensus Estimate: (Source: market screener website)

  • The closing price of Tata Consumer was ₹ 589 as of 04-February-2021.  It traded at 58x/47x/40x the consensus Earnings per share estimate of ₹ 10.2/12.5/14.7 for FY21E/FY22E/ FY23E respectively.
  • The consensus average target price is ₹ 605/- which implies a PE multiple of 41x on FY23E EPS of 14.7/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

 

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08 Dec

Strong jump in online sales – Tata Consumer

Update on the Indian Equity Market:
On Monday Nifty closed 0.7% higher at 13,356. Among the sectoral indices, Media (+2.8%), PSU Bank (+2.1%), and Pharma (+1.6%) closed higher. Nifty Realty (-0.3%) was the only sector which closed lower. UPL (+4.6%), Adani Ports (+3.6%), and HUL (+3.2%) closed on a positive note. SBI Life (-1.5%), Nestle (-1.4%), and Kotak Bank (-1.4%) were among the top losers.

Excerpts from an interview of Mr. Sunil D’Souza, MD and CEO, Tata Consumer with CNBC-TV18 dated 3rd December 2020:

● Any M&A deal of size and significance that happens in India does pass through the Tata Group.
● For the March quarter, 2.5% of sales were online and now sales are around 5-6% online out of total sales.
● There is a strong jump in online sales and the company expects the momentum to continue.
● On the food and beverages business, he said the results were good and the company is happy with its numbers.
● The core category business and out of home businesses are showing traction as there is an ease in lockdown.
● On Core categories, he said the tea is coming back to double-digit value growth. The company is gaining market share.
● On Tata sampann, he said it has outgrown the total food business by 3x.
● On tea prices, he says, the prices are moving in a small range. On the coffee side of the business, he says, Eight O’clock coffee which is a big brand is showing good momentum.
● On domestic side, Tata Coffee which is a subsidiary is a B2B business and there is some softness.
● On Starbucks, he said the company will continue to open outlets. The company has 201 outlets. The number of outlets opened this year might be equal to what the company opened last year.

Consensus Estimate: (Source: market screener and Investing.com websites)
● The closing price of Tata Consumer was ₹ 567 as of 7-December-2020. It traded at 57x/ 46x/ 41x the consensus Earnings per share estimate of ₹ 10/12.3/13.9 for FY21E/ FY22E/ FY23E respectively.
● The consensus average target price for Tata Consumer is ₹ 571/- which implies a PE multiple of 41x on FY23E EPS of 13.9/-.
Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

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