Tata coffee, a $90 billion Tata group company, is one of the world s largest integrated coffee plantations. The recent joint venture between Tata and Starbucks Coffee has brought an interesting turn of events for the company. Starbucks Coffee will source its processed coffee for its Indian retail stores as well as stores in other strategic geographies. The company is also engaged in plantation of Pepper, Cinnamon, Oranges etc. The company also forayed into wood composites and plywood business under the brand name Tata Conswood.
The net profit in December quarter is better than the same quarter last year by 20.8% even though the sales have remained flat. This points at improving net profit margin.
The sales have grown at a healthy 5 year CAGR of 9.6%. The bottom line has grown at a very impressive 27.7% CAGR over the last 5 years. The trailing quarters suggest that this financial year will see the net profit rise more than 45% as compared to last year.
Pointers for companies expected performance over next few years:
The price trend for pepper and cinnamon in the past quarters will lead to improved top-line this financial year.
Tata coffee has started harvesting wind energy for its coffee roasting plant which will help reduce costs and improve profit margins.
Tata coffee has had business relations with Starbucks Coffee since 2004 and both companies have since worked together at improving coffee harvesting and processing techniques.
Starbucks coffee and Tata have started a state of the art coffee roasting plant in Coorg, Karnataka. This plant is capable of 375 tonnes per annum output.
Tata coffee will supply for all the Tata Starbucks retail stores in India. They have opened 4 stores in Mumbai and 3 in Delhi. Though they are tight lipped about the number of stores they plan to open in India; from one of the earlier press releases it is expected they will open 50 stores in Phase 1 in India. This can be expected to happen over next 8-12 months.
Apart from supplying to Indian retail stores, the new plant will also be supplying to Starbucks coffee stores in some other geographies. Most likely these will be Asian countries. However, since Europe also imports Arabica and Robusta coffee varieties from India (Coffee day ventures is one of the big coffee exporters to Europe) it can be expected that Tata coffee will be supplying to some of the European locations soon too.
Starbucks coffee expects India to be one of its top 5 markets. Hence, over the next few years we can expect a huge increase in store outlets in the country. This will further add to Tata coffee s top-line revenue.
Coffee consumption trend has been on a upward trend in India in the past 5 years, especially in Tier 1 and Tier 2 cities. This is evident by the 1400 stores operated by Caf coffee day, 200 stores operated by Barista, 100 for Costa coffee in these cities. Starbucks Coffee has a much higher brand value and may comfortably eat into market share of these coffee shops in metropolitan cities.
Tata coffee is a regular dividend payer. Expect a dividend of around Rs.14-16 per share this calendar year (usually around August).
Value at Risk (VaR)
The average monthly return in Tata coffee scrip since Jan 2010 is 4.87%. The monthly value at risk using 95% confidence interval indicates a maximum probable loss of -20.75%. However in last 30 day period (Jan 27 to Feb 26), the stock lost 12% and has again turned up. The loss may have been due to the volatility arising as we approach union budget announcement. Historically, the downside should be limited at this juncture.
Long Term Bet
Scenario analysis using different growth rates for revenue and earnings suggest stock price of Rs.3000-4100/share (or adjusted) by FY18.
Business Outlook Tata coffee, a $90 billion Tata group company, is one of the world s largest integrated coffee plantations. The recent joint venture between Tata and Starbucks Coffee has brought an interesting turn of events for the company. Sta...
The erstwhile Satyam Computers tarnished glory is on its way back with Mahindra s trusted name backing the technology company. Though it not counted in big three anymore but soon there may be a combined force of Tech Mahindra and MahindraSatyam which will compete the biggies (TCS, Infosys etc.). Mahindra s takeover of Satyam has brought a lot of synergy and a merger with Tech Mahindra will further enhance the value of that synergy. With this, there will be a amalgamation of years of technological expertise of Satyam with Manufacturing prowess of Mahindra group and Tech Mahindra s expertise in telecom. The company already offers a whole host of IT service and products. A good portion of it revenue comes from the BPO operations.
The Q3 drop reported few days back is on the account of an exceptional item (loss) of Rs.294 crore. This was the last litigation against the company outside India and has been completely settled. The business operation profitability is intact and the stock price drop caused by the negative news can be taken advantage of. The operating performance has improved by about 45% from the same quarter last year. The company has not added debt which is confirmed by the similar interest payout as last years quarters. Therefore, the next quarter will be of good numbers.
After 2 years of turmoil post the infamous book cooking fiasco, the company managed to clean out its financials and became profitable in FY12. The trailing quarters operating performance suggests the FY13 result will be marginally better. The net profit figures will be around FY07 s figures.
The Satyam Tech Mahindra merger will create a $2.4 billion company with widest array of IT and BPO services on offer in the country.
It will drive the combined entity back to Tier-I IT company.
With Mahindra s manufacturing prowess, the combined entity would be able to cater to whole host of manufacturing intensive industries such as automotive, defense etc. This is proven by order acquisition from companies like Boeing, GE, Saab, BASF etc.
Tech Mahindra s expertise in telecom sector will enable the combined entity to provide product cum services platform. This will also enable upstream and downstream integration of telecom sector clients. It will be a big player in enterprise mobility, which is touted to be the next boom.
The BPO segment is going to be a bigger contributor in the next few years as the IT business clients will also look to outsource their back and middle office operations to their IT solutions provider i.e. the combined entity.
The swap ratio of 2:17 is being contested and that is also posing some trouble in the stock price movement. The current swap ratio is more in favor of Tech Mahindra shareholders. Over the past few quarters, MahindraSatyam has been more profitable operationally and is still trading at a lower valuation as compared to Tech Mahindra. The current swap ratio prima facie looks on the basis of CMP. There is likelihood that the swap ratio might get tweaked slightly. If that happens, there may be a big spurt in the stock price.
Value at Risk (VaR)
The value of risk suggests a maximum monthly downside of 13.44% at 95% confidence level. This calculated on the basis of last 3 years data.
The stock has shown some weakness in past few trading sessions owing to its Q3 numbers. But it has stayed above its 9 week trend support line. Also, it has stayed above its 30-day moving average even during the bout of weakness.
Business Outlook The erstwhile Satyam Computers tarnished glory is on its way back with Mahindra s trusted name backing the technology company. Though it not counted in big three anymore but soon there may be a combined force of Tech Mahindra an...
South Indian Bank (SIB) was incorporated in 1928 during the Swadeshi movement. The establishment of the bank was the fulfillment of the dreams of a group of enterprising men who joined together at Thrissur, a major town (now known as the Cultural Capital of Kerala), in the erstwhile State of Cochin to provide for the people a safe, efficient and service oriented repository of savings of the community on one hand and to free the business community from the clutches of greedy money lenders on the other by providing need based credit at reasonable rates of interest. SIB is engaged in personal banking, NRI banking, business banking, and general banking services in India.
Translating the vision of the founding fathers as its corporate mission, the bank has during its long sojourn been able to project itself as a vibrant, fast growing, service oriented and trend setting financial intermediary.
SIB has grown at 25% CAGR in the last five years in terms of business and PAT.
SIB reported a strong Q3FY13 largely driven by better?than? expected rebound in margins. Net profit of SIB rose 25.44% to Rs 128.25 crore in the quarter ended December 2012 as against Rs 102.24 crore during the previous quarter ended December 2011. Total Operating Income rose 19.51% to Rs 1127.75 crore in the quarter ended December 2012 as against Rs 943.61 crore during the previous quarter ended December 2011. Steady improvement in asset quality with Gross NPA at 1.6% down QoQ due to Rs0.4bn restructuring adjusted for which asset quality performance was satisfactory and NNPA stood at 0.7%. NIM improving from 3.05% last year same quarter to 3.24% in Q3FY13. Overall, Q3FY13 was a stable quarter.
Outlook and valuation:
Currently, the stock is trading at moderate valuations of 1.2x FY2014 BV. In light of capital-raising and strong expansion plans, I value the bank at 1.5x FY2014 BV with a target price of Rs 35 per share
Bank s profit grew ~ 3 times in last five years which is almost equal to the growth rate of industry leaders in private sector like HDFC and ICICI.
Stock has been on the uptrend and has gone up more than 20% since last year, but HDFC, ICICI and Axis Banks have grown more than 45% during the same period. It has got scope to move up further post 29th Jan RBI monetary policy
Now that the stock has consolidated b/w 27-28 for some time, it started moving up. I expect this movement to continue till it reaches 35.
Both from the fundamental and technical perspective this stock looks attractive and investors and traders should look at buying this stock on dips.
South Indian Bank (SIB) was incorporated in 1928 during the Swadeshi movement. The establishment of the bank was the fulfillment of the dreams of a group of enterprising men who joined together at Thrissur, a major town (now known as the Cultur...
When the economy starts doing well, its not only the FMCG companies that will do well but also many other category companies. New and businesss news companies will also do well. This was my rationale to pick up Network 18 and you can see the result for yourself. Market cap close to 5000 crores and expecting to be the leader in buisiness.
Likely to cross 100 in two years. Cheers!
When the economy starts doing well, its not only the FMCG companies that will do well but also many other category companies. New and businesss news companies will also do well. This was my rationale to pick up Network 18 and you can see the result...
The intrinsic strength of the company can be gauged from the holdings by institutional investors. This company has moved only one way for the last one year. Thatis up and up. Market cap of 800 crores and EPS of 13. Industry average being 13, and EPS for FY 13-14 being 17-18, I expect this company to touch 200 levels in next two years.
You can see many such shares in my portfolio. I recommend a strong buy. Just check these out at http://www.aartigroup.com/
Good luck and cheers!
The intrinsic strength of the company can be gauged from the holdings by institutional investors. This company has moved only one way for the last one year. Thatis up and up. Market cap of 800 crores and EPS of 13. Industry average being 13, and EP...
Disclaimer: You are responsible for your own investments. Niveza.in does not guarantee the accuracy or completeness of information on the site, nor does Niveza.in assume any liability for any loss that may result from reliance by any person upon any such information or recommendations. Such information recommendations are for general information only. Nothing contained herein is an offer to sell nor solicitation to buy any securities.