Shares of Tata Global Beverages hit fresh lifetime high Rs 407.95, up 7.4 per cent, on the BSE on Wednesday after the company reported a 25 per cent year-on-year (YoY) jump in the net profit at Rs 135.85 crore in the third quarter ended December, aided by higher sales and lower tax rate. In the year-ago period, its consolidated net profit stood at Rs 108.89 crore.
At 10:27 am, the stock was quoting at Rs 404.2 apiece, up 6.4 per cent on the BSE. In comparison, the S&P BSE Sensex was ruling 0.48 per cent higher at 40,985.93 level. A total of 12.46 million shares have changed hands on the counter on the NSE and BSE till the time of writing of this report. So far in calendar year 2020, the stock has outperformed the benchmark index by surging 18.3 per cent till Tuesday, compared to a decline of 1.1 per cent in the Sensex.
Besides, the tea and coffee beverages' company logged a 23 per cent rise in Consolidated EBITDA at Rs 248 crore during the qusrter under review. The EBITDA margin stood at 12.2 per cent.
"Group consolidated net profit is higher by 25 per cent as compared to corresponding quarter of the previous year aided by lower tax rate and improvement in the performance of associates and joint ventures," the company said in its regulatory filing.
Revenue from operations -- driven by improvement in branded and non-branded business-- grew by just 3 per cent at Rs 1,961.9 crore, as compared with Rs 1,912.58 crore in the corresponding period last fiscal. "The company recorded steady revenue growth despite challenging macroeconomic conditions in India and some key international markets," Ajoy Misra, Managing Director and CEO, said.
"TGB’s performance was below our expectations, mainly due to lower-than-expected EBITDA at the overseas tea business, and its standalone (primarily because of higher ad spend) basis... We cut our PAT estimate by 10 per cent for FY20 but largely maintain it for FY21/22," wrote analysts at Motilal Oswal Financial Services in a results review note. The brokerage firm has maintained 'Buy' call on the stock with a taregt price of Rs 439.
"We trim FY2020-22E EPS by 1-3 per cent as we moderate growth and model higher profitability (RM tailwind and cost efficiencies)... The company is firmly on a turnaround path as reflected by steadier growth and profitability in India/overseas portfolio," said analysts at Kotal Institutional Equities.
TATA GLOBAL-TATA CHEM MERGER
That apart, the firm said that Tata Global Beverages and Tata Chemicals (Consumer Products Business) merger is in the final stages, and the effective date would be announced shortly.
"The merger of TCL’s consumer business with TGB is in sync with Tata group’s focus to create a single FMCG-focused company. Merger of TCL’s consumer business with itself marks the company’s entry into an additional segment of staples with an addressable market size of INR770b (apart from the current addressable market of Rs 27,000 crore in tea and coffee)," wrote analysts at MOFS.
Early January, the Mumbai bench of National Company Law Tribunal (NCLT) had sanctioned the Scheme of Arrangement between Tata Chemicals and Tata Global Beverages, and their respective shareholders and creditors for the demerger of the consumer products business consisting of the business of sourcing, packaging, marketing, distribution and sales of vacuum evaporated edible common salt, spices, protein foods and certain other food and other products from Tata Chemical to Tata Global Beverages.
In May last year, Tata Group had decided to demerge consumer business of Tata Chemicals and merge it with Tata Global Beverages. Tata Global Beverages will be renamed as Tata Consumer Products.Under the scheme, every shareholder of Tata Chemicals will get 1.14 new equity shares of Tata Global Beverages for every one equity share held in Tata Chemicals.
In a managerial update, the company announced that Sunil Alaric D’Souza will takeover as the MD and CEO effective from April 4, 2020.
"TGBL reported decent operating performance in a weak environment. Key highlights included resilience in India tea business growth (6%/7% revenue/volume) with stable profitability despite higher A&P spends; broadly steady/improved performance of Tata Coffee and overseas portfolio; and strong topline growth of Tata Starbucks. We like what we see and expect enhanced focus on growth and sharper execution under the new CEO," wrote analysts at Kotak Institutional Equities in their Q3 result note, adding, "We rollover to March 2021E, raise multiples to factor leadership augmentation and improving performance".
The brokerage firm has 'add' stance on the stock with a revised target price of Rs 400 (up from Rs 335).