Tata Global Beverages Ltd. (TGBL) | Q3FY15 Result Update | Mixed-Bag performance: international segment reported muted performance: Maintain BUY with target price of Rs180 ::IndiaNivesh

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Tata Global Beverages Ltd (TGBL) Q3FY15 result was Mixed-bag; revenue in-line with estimates; EBITDA and PAT below the consensus. Consolidated revenue rose by ~3.0% y/y to Rs.21.4bn [v/s Bloom est: Rs.21.1bn] driven by Tea [+0.9% y/y], Coffee [+9.5% y/y] and Others [+13.5% y/y] segments. EBITDA went up 1.5% y/y to Rs.1.9 bn [v/s Bloom est. Rs.2.1 bn] on back of revenue growth and decline in Advertisement expenditure. During the quarter, the company reported total expenditure (as % of revenue) at 90.7% (v/s 90.6% in Q3FY14). As a result, EBITDA margin remain muted at 9.3% [v/s 9.4% in Q3FY14]. During the quarter, interest expenditure went down 3.6% y/y to Rs.268 mn [v/s Rs.278 mn]. Other income and depreciation stood at Rs.116mn/Rs.380 mn [v/s Rs.150mn/ Rs.322 mn in Q3FY14]. Tax rate during the quarter was 40% [v/s 8% in Q3FY14] due to absence of one-time tax credit of Rs.460 mn accounted in Q3FY14. As a result, reported net profit, went down 29.5% y/y to Rs.842 mn (v/s Bloom est. Rs.1,195 mn). Key Result Take Away ■ TGBL international revenue [64% of Coso. Rev] delivered muted performance to Rs.13.6bn (v/s Rs.13.6 bn) on account of de-growth EMEA, partially offset by growth in Canada and Australia. During the quarter, total brands contributed 88% of the total revenue. The increasing presence in high growth speciality tea business (5% of the total revenue) looks positive and could bode well on international revenue performance going-ahead. However, black tea heavy portfolio along with higher presence in Europe reduced revenue visibility. TGBL constant initiative to reduce advertising expenditure [down 5.9% Y/Y to Rs.3.7 bn], despite range of new product launch looks a prudent move. The company’s advertising expenditure (as % of Rev) stood at 27.7% (v/s 29.4% in Q3FY14). ■ South Asia business (India/Bangladesh/Pakistan) during the quarter grew by 8.8% Y/Y to Rs.7.8bn led by double-digit volume growth. Starbuck’s 64 stores across Mumbai, Delhi NCR, Bangalore, Pune, Chennai, and Hyderabad witnessed excellent consumer response. The company’s Tata Water Plus and Himalayan natural water delivered healthy double-digit growth. As a result, the company’s other segment delivered health double-digit (+13.5% 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.147 mn in Q3FY15 v/s -Rs.94mn in Q3FY14). ■ On a consolidated basis TGBL reported revenue of Rs.21.4bn, primarily led by Tea [+0.9% y/y], Coffee [+9.5% y/y] and Others [+13.5% y/y] segments. On a consolidated basis tea/coffee/others segment contributed 74.0%/25.1%/ 0.9% to overall company level revenue, respectively. ■ PBT Interest & Other Un-allocable de-grew by 1.4% Y/Y to Rs.9.5 bn led by Tea (down 5.3% y/y) and widened losses in Others (Rs.147 mn v/s Rs.94 mn in Q3FY14), partially offset by 31.6% Y/Y growth in Coffee segment.

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