Tata Global Beverages Ltd (TAGL.NS): 1QF14: Earnings Inline: Morgan Stanley Research
Quick Comment - In Line Results: TGBL reported consolidated revenue, EBITDA and adjusted PAT growth of 5%, 15% and 16%, respectively, vs. our expectations of 7%, 22% and 12%. TGBL's revenue growth was largely driven by domestic revenue growth of 18% with <1 150bps="" 22="" 2qf14="" a="" across="" and="" believe="" benefit="" br="" business="" categories="" cost="" coupled="" cyclical="" drive="" efficiency="" efforts="" expansion="" f14e.="" for="" from="" fx.="" fx="" geographies="" growth="" highlight="" impact="" improvement="" improving="" in="" initiatives="" input="" international="" is="" its="" key="" kick="" large="" management="" margin="" most="" of="" on="" ongoing="" onwards.="" operating="" ow.="" part="" pat="" profitability="" remain="" results.="" should="" tailwinds="" tgbl="" the="" these="" to="" uptrend="" was="" we="" will="" with="" yet="">
International Tea: International tea revenues for 1QF14 were down 3% YoY. We estimate favorable FX impact of ~2% and organic revenue decline of ~5%. According to management, Australia, Canada, the Middle East and France reported good performance for the quarter. However, they highlighted the challenging business environment in the UK and poor performance in Eastern Europe. In our view, the key positive has been operating margins which are flat, driven by a concerted effort for cost rationalization and product mix improvement. Over the next two quarters, we expect this segment to benefit from relatively benign input costs.
Domestic Tea: Increase in domestic tea prices adversely affected the India tea business. TGBL reported 18% revenue growth for the quarter, driven largely by pricing. TGBL reported MAT 20.2% volume share and 21.9% value share for June 2013 in India. Gross margin declined 150 bps during the quarter, reflecting high domestic tea prices. EBITDA margin decline however was marginally lower at ~140bps as management continues with its focus on cost rationalization.
International Tea: International tea revenues for 1QF14 were down 3% YoY. We estimate favorable FX impact of ~2% and organic revenue decline of ~5%. According to management, Australia, Canada, the Middle East and France reported good performance for the quarter. However, they highlighted the challenging business environment in the UK and poor performance in Eastern Europe. In our view, the key positive has been operating margins which are flat, driven by a concerted effort for cost rationalization and product mix improvement. Over the next two quarters, we expect this segment to benefit from relatively benign input costs.
Domestic Tea: Increase in domestic tea prices adversely affected the India tea business. TGBL reported 18% revenue growth for the quarter, driven largely by pricing. TGBL reported MAT 20.2% volume share and 21.9% value share for June 2013 in India. Gross margin declined 150 bps during the quarter, reflecting high domestic tea prices. EBITDA margin decline however was marginally lower at ~140bps as management continues with its focus on cost rationalization.
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