Kolkata, Aug. 23
Valuations of tea stocks are apparently not in sync with the buoyancy seen in the tea industry in recent times. Trading volumes in major tea counters, after a brief spurt witnessed a few months ago, have started flagging, belying the expectations that were built up on the bourses.
Sector leaders, including Tata Tea, McLeod Russel and Jayshree Tea, are not in the reckoning insofar as investors' interest is concerned, following what looks like a change in perception. This, say analysts, presents a clear disconnect between the industry's overall prospects and investors' expectations.
The declining volumes despite many positive factors such as growth in demand for tea within the country and export potential for Indian tea in leading world markets. This, coupled with improvement in tea companies' topline growth, makes the scenario bleaker from the point of view of valuations.
"We had hoped for a more permanent reversal of trends, especially because of significant developments concerning the tea industry. However, the volumes are just not there, at least not the kind that would sustain investors' interest for long," says an analyst with a brokerage firm.
McLeod Russel, for instance, closed today at Rs 106.90 against its 52-week high of Rs 160 reached earlier this year.
Tata Tea has already announced a profit after tax of Rs 44.56 crore for the quarter ended June 30, 2006, as compared to Rs 43.41 crore in the corresponding quarter of 2005-06. Total income has increased from Rs 242.38 crore to Rs 265.58 crore. Tata Tea share price at the BSE hovered around Rs 845. On Wednesday, it dipped to Rs 827.90 after reaching a high of Rs 847.
Similar is the performance of the Jay Shree Tea & Industries' stock. Over the past month, the stock is hovering around Rs 115. On July 24, it recorded its 52-week low as the price dropped to Rs 91. During the February tea rally, it had reached a high of Rs 220. However, this B.K. Birla group company's net sales in Q1 jumped to Rs 46.4 crore (Rs 40 crore).
Share price of Goodricke Group Ltd has stagnated around Rs 85-86 after falling to Rs 55 on July 31, recording its 52-week low. This 74-per cent subsidiary of British tea major Camelia plc is a significant player in Darjeeling tea. Net sales of Goodricke also jumped to Rs 44 crore (Rs 38.5 crore) in the first quarter.