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Multi Baggers

Aashish Tater

5.30 AM Jan 1st 1970

TATA Cons. Prod

BSE ID : 500800     NSE ID : TATACONSUM

RECOMMENDED PRICE 155.25

PEAK FROM RECO 889.00 472.62%

CURRENT PRICE 1095.40 Resource id #12

We expect Tata Global Beverage is going to be a portfolio stock and with lot many triggers in the industry Cafe Coffe Day listing etc will come in limelight. We recommend this stock at Rs 155.25 with a target price of Rs 225.

Tata Global Beverage

The journey has begun for the kid to Become a Star, worth the Buck at CMP of  Rs. 155 as it has partner Starbucks

About TGB:

Tata Global India's largest branded tea play with known brands Tetley Jemca and Good Earth. Its coffee brands Eight o' clock Grand contributes 25% to its consolidated revenue. The baby asset which will be a Star Asset in days to come is StarBucks JV with Tata Global. Company is also focusing on other products with brands like Himalya Water , Tata Gluco Plus and Tata Water plus.

Key Triggers:

The company JV with Starbucks biggest game changer in days ahead. Starbucks globally does sales of 10.5 bn$ and is valued at 4 times its sales. So think of the valuation the company will derive as the "out of home" coffee is the new culture in India both in metro and tier 2 cities. The venture has all the potential to be bigger than the company market cap itself. However this will take its time as starbucks blends its taste with Indians which is definitely getting good response and also fitting the bill of the youngsters and office goers.

An integrated play for company owned stores will be the game changer: Imagine a coffee shop packing and selling its own water, has to offer Green tea and or otherwise the coffee . This is going to be a high margin business which has seen substantial demand and growth swing as it will be backed by the tycoon of the industry Starbucks and a brand which is most valuable from Indian perspective Tata's. Lot of synergies will be workable once the store count increases to  100 or even more.

Normally it takes 3 years for large MNC to understand demographics and market is smart enough to sense the opportunities. Starbuck JV happened in 2012 and anchor investors who have made fortune in the markets have already been buying the stocks.

Thus by the time the next phase of the JV begins the stock will be rerated significantly is what we believe.

Valuations:

Tata Global is an FMCG branded play with last year eps of close to 8 thus making it a trailing PE of appx 18 19 times. The company has taken considerable time to consolidate its mineral water business, starbucks JV and create brand and legacy of Tata Tea Gold and Tata Tea Premiumand others. Now the company is expected to encash all the opportunities it has forayed into from next year in a big way.

Tata Global owns 57 percent in tata coffee thus on a market cap of 9600 it owns 1100 crore of tata coffee.  Including tata coffee stake the company owns worth 1700 crore of quoted investment and 1900 crore of unquoted investments which itself will be sizeable if valued at current market cap. Coke Pepsi and others derive valuation of 2.5 times sales Indian FMCG giants derive market cap to sales of 3 times whereas tata global derives 1.1 times its expected sales. Thus potential for rerating is high on the stock.

Patience + Strategy for wealth creation in the stock 

How to value the Giant in the making is going to be tough in near term as we expect the value of Starbucks JV could be higher than the current market cap of the company if someone sees the business over next 4-5 years.

With higher growth and PE expansion we expect it to give stable returns from current levels valuing the company just like other FMCG plays it can easily get PE expansion to tune of 30 times coupled with higher growth and Starbucks backing the stock is expected to take off for a target of 225 over medium term.

Our rationale for picking stocks was never focused on earnings we have seen how lifestyle/trend-setting or companies with strong parentage performs in bull run look at Blue Dart , Page Industries (Jockey brand) United Spirits Diageo. We expect this is going to be a portfolio stock and with lot many triggers in the industry Cafe Coffe Day listing etc will come in limelight. Buy from the house of Tata's it has a partner which is a star and expected to be a Star.

Disclosure (SEBI Registration Number for Aashish Tater :  INA300001206)  
Stock Ownership No
Stock traded in Last 30 days ( No trading or investment activities done) No
Stock Recommended to Clients Yes
Remuneration/Benefits received from company in 12 months No
Merchant Banking Market Making activities / projects No
Any arrangement with co. to affect the report write up No

Disclaimer: Aashish Tater is an investment adviser based in Kolkata, INDIA. At the time of writing this article, he, his firm and dependent family members have no position in the stocks mentioned above. The author invites readers to send him email and welcomes comments, feedback & queries at query@fortunewizard.com. This report has been prepared solely for information purposes and the information contained herein may not be deemed to be an investment advice. Such information is impersonal and not tailored to the investment needs of any specific person. The information contained herein is not a complete analysis of every material fact representing any company, industry or security. The views expressed may change. While the information contained herein has been obtained from sources believed to be reliable, no responsibility (or liability) is accepted for the accuracy of its contents. Investors are advised to satisfy themselves before making any investments and should consult with and rely upon their own advisors whether and how to use such information in making any investment decision. Neither the author nor his firm accepts any liability arising out of use of the above information/ article.

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