Tata Global Beverages Limited (TGBL) is an emerging player in the global
beverage market. The company has made a strategic shift from being a local tea
company to a global beverage company through various acquisitions and
strategic partnerships with global beverage giants like PepsiCo and Starbucks. As
a result, the company has made an entry into the top 10 global companies list in
the hot drinks category, posing a challenge to global players like Nestlé, Unilever
and Kraft Foods. The companys product portfolio comprises leading global
brands like Tetley, Eight O Clock and local brands like Tata Tea. Despite its leadership position in the Indian packaged tea
market, No. 2 position in the global tea market and generating ~90% of its total
revenue from branded products, TGBL is trading at 12.2x FY2013E EPS (which is
at a discount to its FMCG peers, trading at 20x–35x FY2013E EPS). Also, on
EV/Sales basis, the stock is trading at 0.6x FY2013E EV/Sales (historical average
of 1x EV/ Sales). Hence, we initiate coverage on the stock with a Buy
recommendation and a target price of Rs97, based on 14x FY2013E EPS of
Rs6.9(0.8x FY2013 EV/Sales).

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