Tata Shopper Merchandise: Retain ‘purchase’ with TP of Rs 800

Working capital days was decreased to 39 in FY21 from 87 in FY20 — driving robust FCF era. Starbucks is now current in 18 cities with 221 shops.

Tata Shopper Merchandise (TCPL) which articulated ‘Platform for higher’ in FY20, speaks about ‘Remodeling for Higher’ in FY21. It plans to spend money on core enterprise, unlock synergies, discover new alternatives and drive digital transformation and innovation. MD&A focuses on acceleration of tendencies similar to (1) emergence of do-it-yourself, (2) comfort procuring and e-commerce adoption and (3) Well being and wellness. It has continued to spend money on distribution merger and growth. It delivered materials market share positive aspects of 190bps and 160bps in India tea & salt, respectively in Mar’21. In our view, Mar’21 exit market shares in tea & salt have been ~24% and ~35%, respectively.

Working capital days was decreased to 39 in FY21 from 87 in FY20 — driving robust FCF era. Starbucks is now current in 18 cities with 221 shops.

Reiterate purchase: We mannequin TCPL to report income and PAT CAGR of 12.6% and 25.5%, respectively, over FY21-23E. We retain ‘purchase’ and worth the inventory on SoTP foundation with goal value of Rs 800. Key danger is execution — delays in realising integration positive aspects, ramp up of distribution and so on.

Remodeling for higher: From the stance as ‘Platform for Higher’ in FY20, the corporate speaks about ‘Remodeling for Higher’ in FY21. It focusses on (1) strengthen and speed up core enterprise, (2) drive digital and innovation, (3) unlock synergies, (4) discover new alternatives, (5) create a future prepared organisation and (6) embed sustainability.

Replace on distribution synergies: The numeric distribution of Tata Tea and salt has elevated 15% and 11%, respectively, in FY21. Direct protection has moved up 30% and is prone to attain 1mn shops by Sept’21. Revenues from trendy commerce and e-commerce have been up 31% and 130%, respectively. The corporate’s market shares in tea and salt are up 190bps and 160bps, respectively YoY.

Highlights from MD & A: Whereas shopper tendencies don’t change in a single day, the pandemic has accelerated some tendencies. (1) there’s emergence of do-it-yourself and residential chef, (2) comfort procuring and e-commerce adoption has accelerated and (3) well being and wellness grew to become a key space of focus for shoppers having a direct affect on meals and beverage selections.

Discount in working capital and better FCF era: Publish merger of distribution community, discount in layers in distribution in addition to growth of direct protection, the online working capital days have declined to 39 in FY21 from 87 in FY20 resulting in robust FCF era. We mannequin regular enchancment in working capital in FY21-23e.

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