We are delighted to share that Tata Coffee (Value Pick - Aug'12) is appreciated by almost 70% since our recommendation. Our equity analysts published Value Pick - Aug'12 research report and shared it with all Value Picks members on 26 Aug'12. Tata Coffee was recommended at price of Rs. 965 and stock has already achieved its target price in Nov'12.
Tata Coffee modern roastery to serve beans to Starbucks – July 26, 2012
- Utz - Efficient Farm Management Practices.
- Rainforest Alliance - Bio-diversity (For Environment Protection)
- SA8000 - Labour standard certification
iv) Improvement in Sales & CAGR
i) Tata Coffee is Asia’s largest coffee plantation company and the 3rd largest exporter of instant coffee in the country. It exports green coffee to countries in Europe, Asia, Middle East and North America. We believe that demand of premium coffee will remain strong and company will do well with its new entrant - Washed Robusta in lucrative US market.
ii) As per our estimates, Tata Coffee can deliver total sales of Rs 630 crores and PAT of Rs 98 crores, resulting in EPS of Rs 52.5 in FY 2012-13. This translates in an expected PE multiple of 18.4 times based on FY 2012-13 earnings.
iii) We expect Tata Coffee net profit margin will be maintained at 15-16%. Tata Coffee operating margins is better to peers group companies and can improve further considering robust demand for its premium product range and recent agreement with Starbucks to source and roast premium coffee beans.
iv) Tata Coffee Ltd has declared good numbers in first quarter of current financial year registering sales growth of 26% and profit growth of 89% compared to same quarter - last year and is expected to perform better in coming quarters.
v) On equity of Rs. 18.68 crores the estimated annualized EPS for FY 12-13 works out to Rs. 52.5 and the Book Value per share is Rs. 244.82. At a CMP of Rs. 964.70, price to book value is 3.94.
Saral Gyan Team recommends “BUY” for Tata Coffee at current market price of 964.70 for a target of Rs. 1320 over a period of 12-18 months.
50% at current market price of 964.70
50% at price range of 885-900 (If stock price falls during market correction)