Wednesday, August 11, 2010

Tasty Bite Eatables Ltd. TBEL - Raw Materials inflation hits profits

Well Tasty Bite latest results. Not a pretty picture definitely. ( Should not be that surprising if one is tracking results of other FMCG firms like Britannia and Nestle whose earnings have fallen to high raw material cost and nil or less price hikes.)
Rating : Reduced from earlier 2x target to ~ 500 changed to sell /reduce till results show improvement. Since TBEL derives most of its Sales from US and latest data showing some signs of the `deflation` in US retail market , steep price hikes could result in impact volumes and market share.
The Good.- Sales up 62% YoY at 20.5 crores. But almost flat Seq. QoQ.
The Bad. - Raw Material cost as a percentage of Sales up 800 bps or 8% from 54% of Sales to 62% of Sales.
The Ugly  - PAT has fallen 75% to just  0.4 crores.
Only good thing is that at cmp of 268, it is trading at Market cap of 68 crores vs Sales of 70-80 crores i.e PSR / Price to Sales Ratio of ~ 1.0 that is definitely not expensive. But for upside triggers and re- rating ,it has to demonstrate reversal to net margins of ~ 10%.
Post results yesterday ~ 14:50 hours ,stock closed down 8% at 268.

Technicals - In the last 3 months ,share price movement has been flat. Keep in mind that it is up ~ 20 x from its last year lows in March 2009.
50 DMA at 262. 200 DMA at 200.

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