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Mixed results; Outlook intact

Tata Consumer Products (previously known as Tata Global Beverages Limited -TGBL) is an Indian multinational non-alcoholic beverages company and a subsidiary of Tata group TGBL markets under the major brands like Tata Tea, Tetley, and Good Earth Teas etc.

* Q4FY21 revenue grew 26.3% YoY to Rs. 3,037cr on strong volume growth and ~100bps/~180bps market share gains in India Beverages and India Foods.

* EBITDA margin contracted 290bps YoY to 9.9% due to higher costs, partially offset by higher other income. Adjusted PAT de-grew 37.3% YoY further impacted by higher taxes.

* Despite regional restrictions/supply chain disruptions, accelerated gains from SoulFull (acquisition), growing overseas markets and improving market share should support company’s performance. We reiterate our BUY rating on the stock with a revised TP of Rs. 730 based on 50x FY23E EPS.

Volume growth momentum continues

Consolidated revenue rose 26.3% YoY to Rs. 3,037cr (-1.1% QoQ) in Q4FY21, upon robust domestic performance (+44.3% YoY) led by rapid volume growth of 23% and 21% in India Beverages (revenue +59.6% YoY to Rs. 1,205cr;) and Foods businesses (+22.4% YoY to Rs. 642cr), respectively. Former outperformed with keen focus on digitalization and premiumization of Tata Tea and Sonnets by Tata Coffee, while the latter excelled with 26%/2% YoY growth in Tata Salt/Tata Sampann portfolios independently. International Beverages stood flat (+0.1% YoY) due to pantry loading. US coffee business (+5% YoY to Rs. 313cr; 2% YoY volume dip) witnessed Bags contracting and K-cups expanding. Key players like Tata Gluco Plus and Tata Water Plus (1.5x value added) helped NourishCo sustain its strong growth momentum with 86% YoY revenue uptick. Separately, Tata Coffee (incl. Vietnam) performed well on high realizations in plantation despite shrinking domestic extractions.

Rising costs stress margins

Consolidated EBITDA declined 2.6% YoY to Rs. 300cr (-16.9% QoQ) impacted by higher material costs (+51.5% YoY, -5.0% QoQ), A&P spends (+19.3% YoY, +3.2% QoQ) and staff cost (+16.7% YoY, +12.0% QoQ). This resulted in EBITDA margin contraction of 290bps YoY to 9.9%. Higher taxes (+93.5% YoY) further impacted Adj. PAT (-37.3% YoY to Rs. 118cr).

Key concall highlights

* Tata Starbucks revenue grew 14% YoY with 94% of stores reopened, 39 new stores including 7 “All Women” stores opened in 7 new cities in Q4FY21.

* Canada bagged 29.3% market share and 6% revenue growth in Q4FY21 with Tetley Super 3.0 gaining volume leadership in specialty tea.

* Tata Sampann - Launched 5 new products in the Ready to cook category in Q4, intensifying the momentum on innovation.

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