Tata Consumer Products Ltd. share price target

Besides, the merger of Tata Chemicals (TTCH) consumer business with itself marks the companys entry into an additional segment of staples with an addressable market size of INR770b (apart from the current addressable market of INR270b in tea and coffee). Currently, the India brand business contributes 50% to TGBs consolidated revenue, which should increase to ~60% post amalgamation of TTCHs consumer business. Plans are afoot to deepen its core by strengthening its leadership position in tea and salt and aggressively expanding its new products (spices, pulses, liquid beverages, packaged foods etc.) The merger of TTCHs consumer business with TGB is in sync with the Tata groups focus to create a single FMCG-focused company. The merger of TTCHs consumer business with TGB offers multiple synergies, including higher outlet coverage, focused new product development, stronger cash flow generation and scale efficiencies.

Consolidated sales increased 4.2% YoY to | 1,834.1 crore, mainly driven by 16% growth in the non-branded business. The tea business reported moderate growth of 4% whereas the coffee business declined 4%. On the volume front, the India tea business reported healthy growth of 8%. Operating margins expanded 333 bps to 12.8% benefitted from benign commodity costs and control over operating overheads. PAT declined 17.1% YoY to | 152.5 crore on account of lower profit from associates. Adjusting for one-offs, net profit increased 45% YoY....

Strong India revenue & product mix saves the day TGBL's consolidated turnover for first quarter 2020 stood at Rs. 1,897.1 cr (5.2% YoY). Geography-wise major revenue contribution was from India at 54% from brands such as Tata tea, Tetley, Himalayan, Fruksi, and Tata Cha etc. Meanwhile contribution from US was 22% followed by Europe and Others at 17% and 7% respectively. Non-branded business revenue surged 25% YoY at Rs. 243 cr; major contributor was Tata Coffee (incl. Vietnam) (82%) at Rs. 204 cr (30% YoY), while rest of the segments contributed 18 % of non-branded revenue. In India overall tea sales rose to Rs.969 cr (7% YoY)...

TGBL has reported a steady quarter led by 5.3 percentage growth in consolidated revenue on YoY basis against 5.7 percentage of growth in Q1FY19.

Tea market share to rise led by premiumisation, innovation TGBL commands 20% market share in tea segment in India. It expects to continue to grow above industry led by new launches. Moreover, it would be benefiting from a shift from unorganised to organised sales on the back of premiumisation, strong marketing campaigns (Jaago Re) and higher sales of new variants (Elaichi, Masala, Agni) while more innovation is expected to drive growth in UK (Tetley cold Infusions & Tetley decaf sleep) and help in consolidation of market share in other geographies. We expect 5.5%...

We believe TGBL-TCL's consumer business merger is EPS accretive as TCL's consumer business EBIT margin of 17% is higher than TGBL's 9% for FY19 in addition to synergy benefits on account of distribution and cost rationalisation resulting in 100-150 bps expansions in EBITDA margins. Though, India tea and salt business are low growth saturated categories, but strong cash flow of both the businesses would help TGBL to spend more in terms of A&P; for pulses, spices, water & other categories. We believe investment behind new categories would be the key to growth in future....

Focus on retaining market share in India branded tea business TGBL commands ~20% market share in tea segment in India and expects to continue growing ahead of the market led by new launches in the economy (elaichi and masala chai) and premium segments (Chakra Gold Activ+ and Kanan Devan Duet in southern markets). The company has opened six new Tata Cha stores in Bangalore with a view to scale up the out of home tea drinking experience format significantly. We estimate 5.5% revenue CAGR over FY19-21E led by new launches and premiumisation....

Revenue rose by 6.76% to Rs. 1802.59 Cr in Q1FY19 when compared to the previous quarter. Tata Global Beverages Ltd Q1FY19 results Comment

Tata Global Beverages (TGB) is an integrated natural beverage company that derives ~70% of revenue from branded tea business. It is a global player with about 60% of the consolidated revenue coming from markets outside India such as UK, US, Canada etc. Some of its key...

Consolidated sales for the quarter was flat at | 1730.4 crore (Idirect estimates | 1801 crore) on the back of 4.2% growth in tea business and 12.6% de-growth in coffee business. Non-branded business also declined by 15.1% during the quarter Operating margins witnessed an improvement of 300 bps to 13.6% (I-direct estimate 13.3%) which was entirely contributed by lower advertisement as a percentage to sales. The company reduced it's advertisement spend by 23.6% to | 126.7 crore...