Tata Global Beverages Limited.
Recommendation: Strong Buy
View : Long Term
Strategy : ?
CMP : bse cash 172.
Commentary:
This is another recent recommendation from our research team from the Tata Group companies. This company is into brand businesses of tea, coffee and water. Some of you already know Tata tea brands and himalayan drinking water brand. The most interesting development for the company happened in last two years when it tied up with Starbucks and now. The joint venture reported 235 cr topline last year and yes it is making losses but decreasing losses every year with only 20 cr loss this year.Starbucks as we know is 'tha McDonalds' of coffee world and tata global beverages is set to gain massively in terms of revenue and bottomline from this jv in next 5-10 years apart from its slow growing tea, coffee, water business. So, this was the 'starbucks angle'.
The market valuation revision angle.- The Indian stock markets has started to value FMCG firms, especially now after the GST era; very seriously and clearly above the average of last 20 years. This company was totally left out on that front. It was may be being a so called 'commodity heavy' company so far and now we beileve with the strong financials, tata group name and the lack of strong established company stocks, mutual funds will rush to increase their stake in such firms.
We like this revaluation angle more than any other angle.
On the technical front, clearly the stock has not been a 'blockbuster' in any sense.
It risen almost zero percent in last 5 years. It made strong base at 100 which is not to be broken unless market crash comes. It made another 120 strong support, and now trying to cross its lifetime high of above 170 third time, after failing to do so in 2013, and 2014.
With Mistry saga behind the Tatas, and a high performing man of excellent background at leadership of the group we believe this stock is set to soar and cross the high and once this is done, we believe it will open the sky for the stock to double in 1-2 years only.
Also, TGB holds about 57% of Tata Coffee, a listed firm which amounts to about 1400 cr Rs. stake at current price of the stock.
We do not like the commodity business personally, neither the tea, coffee plantations etc. But the above angles with Tata brands name on it. Apart from it, there is a lot of space in many FMCG products segment especially the tea, coffee space to have many more brands to become bigger apart from the present scenario where the top slots are already occupied by the MNCs. On the Price/Earnings ratio front also, it is not unfair, if the firm starts commanding a PE of 20 plus in a bull market.
The market valuation revision angle.- The Indian stock markets has started to value FMCG firms, especially now after the GST era; very seriously and clearly above the average of last 20 years. This company was totally left out on that front. It was may be being a so called 'commodity heavy' company so far and now we beileve with the strong financials, tata group name and the lack of strong established company stocks, mutual funds will rush to increase their stake in such firms.
We like this revaluation angle more than any other angle.
On the technical front, clearly the stock has not been a 'blockbuster' in any sense.
It risen almost zero percent in last 5 years. It made strong base at 100 which is not to be broken unless market crash comes. It made another 120 strong support, and now trying to cross its lifetime high of above 170 third time, after failing to do so in 2013, and 2014.
With Mistry saga behind the Tatas, and a high performing man of excellent background at leadership of the group we believe this stock is set to soar and cross the high and once this is done, we believe it will open the sky for the stock to double in 1-2 years only.
Also, TGB holds about 57% of Tata Coffee, a listed firm which amounts to about 1400 cr Rs. stake at current price of the stock.
We do not like the commodity business personally, neither the tea, coffee plantations etc. But the above angles with Tata brands name on it. Apart from it, there is a lot of space in many FMCG products segment especially the tea, coffee space to have many more brands to become bigger apart from the present scenario where the top slots are already occupied by the MNCs. On the Price/Earnings ratio front also, it is not unfair, if the firm starts commanding a PE of 20 plus in a bull market.
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