Business Standard

Tata Global upward rerating unsustainable: Morgan Stanley

Downgrades stock to underweight, citing poor earnings visibility, weak market positioning, lack of pricing power, lower return ratios and high valuations

Related News

Leading foreign brokerage downgraded Tata Global Beverages (TGBL) to underweight, citing poor earnings visibility, weak market positioning, lack of pricing power, lower return ratios and high valuations as key reasons.

The brokerage has assigned a target price of Rs 140 to the TGBL stock - which is a steep downside of 20% from Friday's closing price of Rs 173.45.

"The TGBL stock now trades at 22 times FY 14 estimated earnings (versus 17 times last five-year average 12 month forward multiple). Although we view the management change and the JV with Starbucks as incrementally positive, we expect the contribution to earnings to be limited", wrote Nillai Shah, Girish Achhipalia and Sanath Sudarsan of Morgan Stanley Research in a report dated 19th November 2012.

Not surprisingly, the stock tanked by 4.66% in the Monday's morning session to make a day's low of Rs 165.35 against a flattish Sensex.

Notably, the TGBL stock has doubled in 2012 so far, outperforming the benchmark Sensex by almost 80%. Further, the stock hit a new 52-week high of Rs 181.70 on 15th November 2012. This outperformance was driven by a host of positive news flow such as its joint ventures with Global giants Starbucks and Pepsi, management change and improving financial performance.

"There is lack of visibility in the international business for TGBL, and the international business remains vulnerable to input cost pressures. To that extent, the stock move seems exaggerated to us, and we would use this opportunity to book profits in TGBL", the report adds.

The brokerage has done a scenario analysis on the company and believes effective utilisation of its cash kitty (of about Rs 800 crore) along with improving pricing power/market share in its branded tea and coffee businesses could act as catalysts for TGBL in the best case scenario.

Read more on:   
|

Read More

ONGC: Street cautious on OVL's acquisition

The largest ever acquisition by ONGC Videsh Ltd (OVL) of $5 billion for 8.4% stake in assets in North Caspian Sea not only increases its reserve base ...

Quick Links

 

Market News

Tyre stocks under pressure

JK Tyre, Ceat, Apollo Tyres and MRF are down 1-5% on NSE.

Outlook 2015: CLSA remains overweight on India

Bharti Airtel, Grasim, ICICI Bank and Infosys high-conviction buys; oil prices key concern

NCC hits 52-week high on FII buying

On Friday, 19 December 2014, Van Eck VIP Emerging Markets Fund bought 3.81 million shares of NCC at Rs 82.90 per share.

Markets flat with positive bias; FMCG & power shares gain

Top gainers on the Sensex are GAIL, BHEL, NTPC, Coal India, M&M, HUL, Bharti Airtel & ITC

Crude palm oil up by 0.4% in futures trade

Speculators indulged in creating positions, supported by pick up in demand in the spot market

Back to Top