Tata Global Beverages (TGB) is the second-largest tea company in the world. In FY15, TGB derived 74% of its turnover from tea sales. Its brands have presence in over 40 countries. It is a global player with 62% of the consolidated revenues coming from markets outside India such as UK, USA, Canada etc. Apart from tea, TGB derived 25% & 1% of its turnover from coffee & water sales respectively.
Valuation and view
We believe that TGB would gain market share across geographies through its innovative premium product offerings. Moreover, the demand for premium products is expected to grow continuously as result of increasing awareness about health and wellness. This would help the top-line and Adj. PAT to grow at a CAGR of 6% and 10% respectively over FY15-FY17E. Further, we rate the stock as ‘BUY’ assigning a forward P/E of 20.5x arriving at a target price of Rs. 151 which implies potential upside of ~19% for the next 12 months.
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