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Another disappointing quarter overall. TGBL reported another weak quarter overall, reporting 3% revenue growth and 2% EBITDA growth on a consolidated basis. While EOC registered solid performance after many sluggish quarters, domestic tea business, coffee plantations business and Tetley (tea) business remained a drag. We retain REDUCE rating on the stock with a target price of `160 (includes `25/share for the Starbucks JV); will review our numbers and rating after the management concall.
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Standalone results – weak performance; below estimates on all counts TGBL reported standalone revenues of `7.6 bn (+8% yoy; KIE: `7.8 bn), EBITDA at `864 mn (declined 13% yoy; KIE: `995 mn) and PAT at `556 mn (declined 47% yoy; KIE: `1.05 bn) – below estimates on all counts. While we would avoid reading too much into the sharp miss in PAT (due to absence of dividend income from subsidiaries during the quarter and consequently higher ETR yoy), weak revenues (lower on account of lack of price-led growth in the domestic tea business) and 13% miss in EBITDA were clearly disappointing. EBITDA margins dipped 140 bps yoy largely on account of higher other expenditure (higher advertising spends, in our view). Consolidated results – EOC posts a solid quarter; other businesses remain a drag Consolidated revenues grew 3% in rupee terms to `21.4 bn, largely in line with our estimates. EBITDA grew 2% yoy, 9% below our estimates due to 190 bps dip in GMs (impacted due to higher international coffee prices). However, 170 bps dip in A&SP (high base) help curtailed EBITDA margin contraction to just 10 bps yoy. Recurring net income declined 3% yoy to `842 mn, significantly lower versus our estimate on account of higher-than-expected ETR. EOC performance – Eight O Clock (EOC) registered a solid performance for the quarter, posting 14% yoy growth in revenues to US$42 mn (aided by higher volumes) and 70% growth in EBITDA to US$8 mn (aided by lower A&SP). Weak consolidated performance, despite solid quarter for EOC, is a reflection of weaker domestic performance, lower revenue/profits in coffee plantations business and sluggish growth in Tetley (tea) business, in our view. Retain REDUCE; will review our numbers and rating after management concall TGBL’s weak results overall despite A&SP moderation (high base) and strong performance by EOC reflects the inherent challenges in its business model – (1) strong commodity linkage with lack of pricing power and (2) high dependence on matured markets like US, Europe, Canada and Australia. We value the stock on an SOTP basis – we ascribe 15X P/E to the company’s core business, add `10/share for its investments in Tata companies (apply 20% holding company discount) and add `25/share for potential value accretion from the Starbucks JV (based on a DCF model for Starbucks). Retain REDUCE – we will review our numbers and rating on the stock post the management concall.
LINK
http://www.kotaksecurities.com/pdf/indiadaily/indiadaily02022015ka.pdf
Another disappointing quarter overall. TGBL reported another weak quarter overall, reporting 3% revenue growth and 2% EBITDA growth on a consolidated basis. While EOC registered solid performance after many sluggish quarters, domestic tea business, coffee plantations business and Tetley (tea) business remained a drag. We retain REDUCE rating on the stock with a target price of `160 (includes `25/share for the Starbucks JV); will review our numbers and rating after the management concall.
�� India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details ��
��
Standalone results – weak performance; below estimates on all counts TGBL reported standalone revenues of `7.6 bn (+8% yoy; KIE: `7.8 bn), EBITDA at `864 mn (declined 13% yoy; KIE: `995 mn) and PAT at `556 mn (declined 47% yoy; KIE: `1.05 bn) – below estimates on all counts. While we would avoid reading too much into the sharp miss in PAT (due to absence of dividend income from subsidiaries during the quarter and consequently higher ETR yoy), weak revenues (lower on account of lack of price-led growth in the domestic tea business) and 13% miss in EBITDA were clearly disappointing. EBITDA margins dipped 140 bps yoy largely on account of higher other expenditure (higher advertising spends, in our view). Consolidated results – EOC posts a solid quarter; other businesses remain a drag Consolidated revenues grew 3% in rupee terms to `21.4 bn, largely in line with our estimates. EBITDA grew 2% yoy, 9% below our estimates due to 190 bps dip in GMs (impacted due to higher international coffee prices). However, 170 bps dip in A&SP (high base) help curtailed EBITDA margin contraction to just 10 bps yoy. Recurring net income declined 3% yoy to `842 mn, significantly lower versus our estimate on account of higher-than-expected ETR. EOC performance – Eight O Clock (EOC) registered a solid performance for the quarter, posting 14% yoy growth in revenues to US$42 mn (aided by higher volumes) and 70% growth in EBITDA to US$8 mn (aided by lower A&SP). Weak consolidated performance, despite solid quarter for EOC, is a reflection of weaker domestic performance, lower revenue/profits in coffee plantations business and sluggish growth in Tetley (tea) business, in our view. Retain REDUCE; will review our numbers and rating after management concall TGBL’s weak results overall despite A&SP moderation (high base) and strong performance by EOC reflects the inherent challenges in its business model – (1) strong commodity linkage with lack of pricing power and (2) high dependence on matured markets like US, Europe, Canada and Australia. We value the stock on an SOTP basis – we ascribe 15X P/E to the company’s core business, add `10/share for its investments in Tata companies (apply 20% holding company discount) and add `25/share for potential value accretion from the Starbucks JV (based on a DCF model for Starbucks). Retain REDUCE – we will review our numbers and rating on the stock post the management concall.
LINK
http://www.kotaksecurities.com/pdf/indiadaily/indiadaily02022015ka.pdf
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