Friday, November 06, 2009

Book Value Rs 287 Debt/Equity 0.42 Reported EPS Rs 25.72 (FY09) Dividend Yield 2%

About The Company:-
Set up in 1964 as a joint venture with UK-based James Finlay and Company to develop value-added tea, the Tata Tea Group of Companies, which includes Tata Tea and the UK-based Tetley Group, today represent the world's second largest global branded tea operation with product and brand presence in 40 countries. Among India's first multinational companies, the operations of Tata Tea and its subsidiaries focus on branded product offerings in tea but with a significant presence in plantation activity in India and Sri Lanka. 

The company has five major brands in the Indian market - Tata Tea, Tetley, Kanan Devan, Chakra Gold and Gemini -- catering to all major consumer segments for tea. The Tata Tea brand leads market share in terms of value and volume in India and the Tata Tea brand is accorded "Super Brand" recognition in the country. With an area of approx 15,900 hectares under tea cultivation, Tata Tea produces around 30 million kg of Black Tea annually.

Tata Tea has subsidiaries in Great Britain, United States and India.

  • The Tetley Group has been a member of the Tata Group since March 2000 and now contributes around two thirds of the total turnover of Tata Tea Ltd. Tetley has offices in Australia, Canada, Poland, Russia, South Africa and the US, as well as joint ventures in Pakistan and Bangladesh. Today, Tetley is the second largest tea bag brand in the world, and Tetley products are on sale in over 40 countries.
  • Tata Coffee with Instant Coffee manufacturing facilities, R&D capability and plantation assets of around 8000 hectares, producing over 9000 MT of Coffee annually, is the largest coffee plantation company in Asia. The company grows both the Robusta and Arabica varieties of coffee and markets both instant and "ground" coffee.
  • Tata Tea Inc. in the United States processes and markets Instant Tea from its facility in Florida, based on sourcing of Instant Tea products out of Munnar, Kerala.

Q2FY10 Performance:-
Tata Tea Q2FY2010 results were ahead of expectations on the back of a good operating performance. The consolidated net sales of the company grew by 18.2% (yoy) to Rs1,402.8 crore in Q2FY2010, substantially driven by the price hikes implemented by the company to combat the increasing price of its raw material (raw tea).
The stand-alone (domestic) business registered a price-led growth of 31.5% yoy while Tata Coffee (consolidated) registered a growth of 13.7% yoy during the quarter.
The operating profit grew by 16.2% yoy to Rs173.9 crore during the quarter.
The exceptional items include gains on foreign currency translations of Rs39.7 crore and a profit of Rs180.4 crore arising out of the sale of shares of Rallis India to Tata Chemicals. Consequently, the reported PAT stood at Rs287.4 crore in Q2FY2010 as against Rs217.8 crore in Q2FY2009. 

For H1FY10, Tetley has 28.7% volume and 28.4% value market share in Great Britain. It has 41% volume and 36.5% value market share in Canada.

For H1FY10, Tata Tea has 20.2% volume market share in India.

For H1FY10, Good Earth has been launched in UK and Canada 

For H1FY10, Tetley's green tea has market share of 18% in Great Britain.

For H1FY10, Tetley's Redbush has market share of 33% in Great Britain.

Eight O Clock grew 30% for H1FY10.

Grand Coffee has been introduced in the company portfolio after purchase of Russian company. The company is deciding to launch its Tetley brand initially in Middle East before going to multi brands launches.

For Q2, USA grow by 61%, Canada & South America by 12%, Great Britain & Africa 32%, Europe & Middle East by 40%, South Asia by 100% while Asia Pacific de-grew by 6%.

Value Of Holdings:-
TATA TEA holds shares in other Tata Group companies, some of them being INDIAN HOTEL, RALLIES INDIA, TATA CHEM, TATA COFFEE, TATA INV CORP, TATA MOTORS, TATA STEEL, TCS, TITAN. Total value of these holdings has nearly trebled now and adds more strength to the balance sheet of TATA TEA.
TATA TEA holds huge Rs 1099Cr as Cash (FY09) which works out to around Rs 178/share.  

Stock Performance And Growth Prospects:-
With the company entering into large tea and coffee markets like the Middle East and South America, revenue growth from the international business is set to improve. Moreover, with the Grand acquisition, the company has acquired a distribution foothold in the 4bn$ tea & coffee market in Russia. 
The stock hit Rs 1017 in August'09 which was a 2-year high but has corrected by more than 15% after that. Considering the long-term growth prospects of the company, the stock looks like a good candidate for investment. Also, the stock has a vastly experiencecd promoter backing and good dividend yield makes it a compelling buy at current levels. 

The stock is breaking out of a down trendline and looks to reverse its recent downtrend soon. Buy and accumulate in dips for target of Rs 1045 in 1-2 years.

Govt mulls sops for tea industry
The union commerce ministry will soon come up with a fiscal package for the plantation sector. It will also provide a debt relief package to some plantation crops, including coffee.
"The government is very serious of addressing the problems of indebtedness of the plantation sector. A note has been sent to the Cabinet Committee on Economic Affairs (CCEA) and we will come out with a package shortly," Jyotiraditya Scindia, union minister of state for commerce and industry, said.

India can be a brand for tea, spices: Scindia
“Out of the 980 million kilograms of tea produced in this country every year, we export 200 million kilograms, which is mostly CTC (crush, tear, curl),” the minister said at a seminar organised by Bharat Chamber of Commerce.

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