FY19-21e EPS cut 3.4-4.5%; TP revised to Rs 220 from Rs 240; ‘Add’ maintained
TGBL reported a consolidated Ebitda decline of 17% y-o-y for Q3FY19. Cost push, both commodity and overheads in the standalone India business, and higher A&P in the international businesses, took the sheen off the fairly healthy topline performance (+11% y-o-y, partly aided by INR depreciation). We bake in the cost pressure into our model and cut FY19-21e EPS estimates by 3.4-4.5%. SoTP fair value stands revised to Rs 220 (from Rs 240). Add stays.
Another weak headline earnings print: TGBL reported a 17% y-o-y decline in consolidated Ebitda to Rs 1.96 bn (13% below estimate). Among the various businesses, standalone India tea business (23% y-o-y Ebitda decline) and Tata Coffee subsidiaries (31% y-o-y Ebitda decline) were the key drags. Performance of international subsidiaries, except EOC on margins, was healthy.
There is value but performance needs to improve: We have baked in the incremental cost push in our model and cut our EPS forecasts for FY19-21e by 3.4-4.5%. TGBL remains a story of patchy delivery on promise. While we see value, the stock is unlikely to perform till the company’s financial performance improves and shows some consistency.