Tata Global Beverages Ltd. |Q2FY15 Result Update | Mixed-Bag performance: International segment continue to report growth: Maintain BUY :: IndiaNivesh

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Tata Global Beverages Ltd (TGBL) Q2FY15 result was Mixed-bag; revenue and EBITDA
above estimates; PAT significantly below the consensus.
Consolidated revenue rose by ~4.6% y/y to Rs.20.2bn [v/s Bloom est: Rs.19.9bn]
driven by Tea [+7.0% y/y] and Others [+10.7% y/y] segments. This was partially
offset by decline in Coffee [-1.8% y/y] segments. EBITDA went up 17.8% y/y to Rs.1.8
bn [v/s Bloom est. Rs.1.7 bn] due to decline in the advertisement and purchase of
stock in trade expenditure. During the quarter, the company reported total
expenditure (as % of revenue) of 90.8% (v/s 91.8% in Q2FY14). As a result, EBITDA
margin expanded 103bps y/y to 9.2% [v/s 8.2% in Q2FY14]. During the quarter,
interest expenditure went up 19.1% y/y to Rs.216 mn [v/s Rs.181 mn]. Other income
and depreciation stood at Rs.319mn/Rs.344 mn [v/s Rs.323mn/Rs.314 mn in
Q2FY14]. TGBL reported exceptional expenditure of Rs.248 mn (v/s profit of Rs.921
mn in Q2FY14). The exceptional gain in Q2FY14 was on back of the sale of land
parcel in Bangalore. Tax rate during the quarter was 50% [v/s 31% in Q2FY14] due
to tax on higher quantum of dividend received from overseas subsidiaries. Reported
net profit, went down 65.3% y/y to Rs.625 mn (v/s Bloom est. Rs.1,070 mn). Adj.net
profit [Ex. exceptional items] went up 36.8% y/y to Rs.938 mn [v/s Rs.685 mn in
Q2FY14].
Key Result Take Away
 TGBL international business went-up c2.2% Y/Y to Rs.13.1bn [65% of Coso.
Rev] led by Canada & Australia (+6.6% Y/Y) and South Asia Brands (+8.0%
Y/Y), partially offset by 2.0% Y/Y decline in EMEA. During the quarter, total
brands contributed 88% of the total revenue and grew by 4.1% Y/Y. In our
view, recent new launches along with increasing share of speciality tea
component in overall portfolio led to deliver growth in international markets.
However, we remain concern about muted growth in coffee segment despite
launch of Eight O’ Clock K cups in US. Additionally, black tea heavy portfolio
along with higher presence in Europe reduced revenue visibility.
 South Asia business (India/Bangladesh/Pakistan) during the quarter grew by
7.5% Y/Y to Rs.6.3bn led by double-digit volume growth. As per our channel
checks, Starbuck’s 50 stores across Mumbai, Delhi, Bangalore, & Pune
witnessed excellent consumer response. The company’s new category water
[Mango flavour Tata Gluco plus] delivered healthy double-digit growth. As a
result, the company’s other segment delivered health double-digit (+10.0%
y/y) revenue growth. Tata Water Plus and Tata Gluco Plus expanded their
reach to three more states- Maharashtra, Gujarat and Uttar Pradesh. However,
concern on profitability and margin still remains as other segment continue
to report loss (-Rs.103 mn in Q2FY15 v/s -Rs.64mn in Q2FY14).
 On a consolidated basis TGBL reported revenue of Rs.20.2bn, primarily led by
Tea [+7.0% y/y] and others [+10.7% y/y], partially offset by de-growth in Coffee
[-1.8% y/y] segment. On a consolidated basis tea/coffee/others segment
contributed 72.5%/26.2%/1.3% to overall company level revenue, respectively

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