Tata Global Beverages (TGBL) has been on investors radar from the start of 2020 as expectations of the company being included in the MSCI index and appointment of a new chief executive officer have revived interest in the stock.
Tata Global shares have run up 22 per cent so far this year to Rs 391.20 as against the 4 per cent gains in the BSEs FMCG index in this period.
The stock hit a record high of Rs 392 on Tuesday.The chances of Tata Global, which will be renamed as Tata Consumer Products, getting into the MSCI India index have gone up following the group restructuring that involves the shift of consumer products business from Tata Chemicals to Tata Global.
The company could find a place in MSCI India index by end of February, according to analysts estimates.The expanded equity base under current foreign investment rules can result in the fast-track inclusion of Tata Consumer in the MSCI India index, said Yogesh Radke, analyst, Edelweiss Financial Services.
The announcement of MSCI should be out after the record date for demerger of Tata Chemicals consumer business.
The shift of the consumer business to Tata Global will improve its product profile, said analysts.
Anand Rathi Share and Stockbrokers initiated coverage on the stock with a buy rating and target price of Rs 473 per share.Given the companys sound fundamentals, strong branded portfolio of products, improving distribution and reach, restructuring initiatives, expected revenue and cost synergies from the merger with the consumer business of TCL and favourable macro traits, we believe the company is well positioned for long-term growth, said Anindita Chaudhury, analyst, Anand Rathi.During the announcement of the deal in May 2019, the management noted that it expected the merger to result in pre-tax gains of 2-3 per cent of TGBLs India branded business revenues over the next 18-24 months.
During H1of FY20, revenues of the company grew 5 per cent YoY to Rs 3,731 crore.The stock has jumped 54 per cent in the last six months against the 8 per cent advance in FMCG index.
Stock is trading at 35 times its FY21 estimated earnings compared to FY19 PE of 61x.
Investors are betting on Sunil D'Souza, who has been appointed as MD and CEO of the company effective from April 4, to drive growth.D'Souza's track record at Whirlpool, over 26 years of experience in consumer goods industry and understanding of F-B industry should benefit TGBL, said Parin Tanna, analyst, B-K Securities.