Tata Consumer held its maiden investor interaction with its new CEO Sunil D’Souza post the March quarter earnings announcement. Admittedly, D’Souza is still ‘new’ to the job, having only worked-from-home thus far after joining TCPL. He comes from Whirlpool India and took over after the country was well into the lock-down. The reason he cited for taking up this job is quite interesting – the combination of brand Tata, the Group’s willingness to put its resources and might behind aggressively growing the FMCG vertical and the opportunities to premiumise the business is what he found compelling about the TCPL ambition.
A lot of this ambition would, in our view, depend upon how the non-salt, non-tea India portfolio shapes up over the coming years – this part of the portfolio is just about Rs 3 billion in size at present, but it is on this portfolio that a lot of hopes are pinned upon, from a transformation perspective. The narrative is interesting, and the company seems to now have a solid CEO to drive the same (Sunil’s record at Whirlpool India has been a commendable one) – success of the transformation exercise is what would further drive TCPL’s trading multiple ahead.
The share price moved down by -1.58 per cent from its previous close of Rs 362.80. The last traded stock price is Rs 357.05.
Investment Rationale
Tata Consumer’s fourth quarter FY20 consolidated revenue and EBITDA grew 35.5 per cent and 76.9 per cent to Rs 24.1 billion and Rs 3.1 billion respectively while adjusted net profit grew 4.3 times to Rs 1.5 billion. Reported figures include addition of the newly-merged salt, spices and staples business acquired from Tata Chemicals and also some benefit from Ind-AS-116 transition.
On a comparable basis, revenue grew 6 per cent while EBITDA was 29 per cent higher. A lot of this growth was driven by the Indian tea business which grew its EBIT by 53 per cent during the quarter, off a soft base, though. India tea volume growth of 5 per cent is softer vs 7-8 per cent seen in first 9M but needs to be seen in the context of the nation-wide lockdown towards end-March.
The commentaries on international beverages business (revenue +6.5 per cent, EBIT +26.9 per cent in the fourth quarter) are interesting: the retail businesses in some of the international geos are growing at 20-25 per cent (pantry stocking) and most factories are running at record capacity-levels not seen in a long time. Admittedly, some of the up-stocking would reverse going forward. The B2B businesses overseas (USA, Australia) have been hit badly, though, and the company has taken some impairment hits on this account (treated as ‘exceptional items’).
Financials
For the quarter ended March 31, 2020, the company reported consolidated sales of Rs 2132.69 crore, down -22.59 per cent from last quarter sales of Rs 2755.08 crore and down -12.22 per cent from last year’s same quarter sales of Rs 2429.68 crore. The company reported net profit after tax of Rs 230.11 crore in the latest quarter.
Promoter/FII Holdings
Promoters held 63.24 per cent stake in the company as of December 31, 2019, while FIIs held 26.34 per cent, DIIs 3.1 per cent and public and others 7.32 per cent.
