Ventura Reports

Over FY24-27, we expect TCPL’s revenue to grow at a CAGR of 14.8%, with India Foods to grow at 22.3%, India Beverages revenue to grow at 15.5%, International Business to grow at 6%, Non-branded Business to grow at 9.7%, to INR 23,005 cr overall. The Starbuck JV revenue is expected to grow at a CAGR of 19.9% by FY27. EBITDA and Net margins are expected to improve by 230 bps to 17.3% and 270 bps to 11.3% respectively. As a result the return ratios, RoE and RoIC are expected to improve by 400 bps to 11.2% and 570 bps to 17.3% respectively by FY27E. Total Debt has decreased after the rights issue and is expected to stay at near-zero levels.
• Foods: TCPL is recognized as one of India’s leading food product manufacturers, specializing in salt production, with new products being added constantly.
• Beverages: TCPL is the second largest packaged tea producer in the India and globally and has also become a leading player in the premium bottled water market in India. It has also launched ready-to-drink products.
• Non-branded: This is a relatively minor share of the overall business compared to other verticals and includes the plantations and solubles business.
• Café chains: TCPL has launched a JV with Starbucks’ parent company to bring its stores to India and has largely become a key player in the QSR industry.

With a robust performance in new businesses, the legacy businesses continue to grow at a tame pace. Additionally increasing competitive intensity from both local and international companies, especially in the Tata Starbucks JV puts pressure on pricing and margins. A continued dependence on legacy products has led to a less favorable product mix, which may impact TCP’s margins.

Valuation Call: We initiate coverage on the stock for a price target of 679 over the next 24 months with a potential downside of 24.1% from the CMP of 895.
Risks to upside:
• Sharp Recovery in Consumption Demand.
• Increased Profitability and Growth of Tata Starbucks.