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Anand Rathi
CMP: ₹384.1
Target: ₹473
The commercial beverages market in India is largely dominated by hot drinks with 52 per cent market share as of 2018, followed by dairy based drinks with 25 per cent, soft drinks market with 15 per cent while both bulk/HOD water and alcoholic drinks constitutes 4 per cent market share each.
Hot tea category (excluding Ready-to-Drink) is a about $44billion industry. It is projected to grow at a CAGR of 5 per cent between 2019 and 2023.
We believe Tata Global Beverages should continue to grow driven by its sound fundamentals, strong brand recognition, improving distribution and reach, restructuring initiatives and benefit from the merger with the consumer business of TCL.
Further, in terms of macro scenario, growing middle class, rising affordability and urbanization is likely to drive demand for beverages in India. Also, out of home channels and current shift in preferences towards premium products, with a conscious choice for healthier products creates further optimism for the sector growth
At CMP the stock is trading at 34.9x times FY21E P/E. We initiate our coverage on Tata Global Beverages with a ‘buy’ rating and a target price of ₹473 a share.
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