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Motilal Oswal Report
Tata Consumer Products Ltd. entered into a Joint venture with Starbucks Corporation in FY13 to form Tata Starbucks Pvt. Ltd. Over the past decade, Tata Starbucks has successfully capitalised on India's growing coffee chain market, expanding rapidly to generate a revenue of ~Rs 12.2 billion in FY24.
Tata Starbucks has accelerated its store addition trajectory over the last five years, tripling its store count to 421 outlets in FY24 from 146 outlets in FY19 (~24% compound annual growth rate in store addition over the period). Going ahead, it plans to reach ~1,000 outlets by FY28 (~2.5 times in the next four years; ~25% CAGR).
Along with store additions, the company is focusing on improved store economics and is rolling out its successful pilot program (wherein it has revamped menu and décor and introduced new serving sizes) in additional stores to improve annual revenue per store (~Rs 32 million in FY24).
Factoring this strategic growth plan, coupled with flourishing Indian coffee chain market (~10-12% growth per annum), we expect Tata Starbucks to clock ~26%/35% revenue/Ebitda CAGR over FY24-26.
Currently, we are valuing Tata Starbucks by the discounted cash flow method and arrive at an Enterprise value of ~Rs 182 billion (~nine times FY26E revenue).
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