The Grob Tea Company Limited cultivates, manufactures, and sells tea in India. It owns tea gardens under the names of Doyang, Dessoie, Kanu, Martycherra, Pathemara, and Teen Ali tea estates located in Assam. The company's gardens comprise an area of 4236.07 hectares and 2332.71 hectares of tea plantations. The Grob Tea Company Limited was incorporated in 1895 and is based in Kolkata, India.

India

The Grob Tea Company Limited

Basic Materials

The company has a track record of regular dividend payments. It has paid dividends in each of the past ten years. Dividend per share (DPS) has grown yearly, but the dynamics are unclear. In the past 12 months, the dividend yield has barely been above zero and was substantially below that of its peers. On average, the company pays dividends annually. 

GROBTEA.NS reported revenue of INR 1 178mn in the last 12 months, up 21% from FY23. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. 

The stock's performance has been mixed in the past six months, with growth following a decline. There is no clear price trend compared to its global peers from the same sector and industry (as shown above). It has underperformed this peer group by 19ppts over six months and grown 8ppts slower in the past month. This is largely true for peers from the same country and sector. With respect to the stock's valuation against its peers, its overall price performance is neutral.

The company has reported modest EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to 17.1% in the last 12 months, up from 4.1% in FY23. 

Historically, GROBTEA.NS has reported modest net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled 12.9%, a growth from -4.4% in FY23. 

The Grob Tea Company Limited reported a return on equity (RoE) of 16.3% in the last 12 months, up from -5.4% in FY23. 

In the last 12 months, the return on capital employed (RoCE) grew to 15.4%, above the peers. 

Another important profitability metric, return on assets (RoA), amounted to 12.3% in the last 12 months, an increase from -4.0% in FY23. 

The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been 1.0 in the past several years. This ratio implies a average shareholder value creation. 

The institutional, legal, and compliance risks associated with the company's country are close to minimal. In combination with rigorous business standards, shareholder rights are well protected.

GROBTEA.NS has very poor trading liquidity. It will take considerable time for the average private investor to sell a common position under normal market conditions. Liquidity is very unstable and becomes extremely unfavourable on the days with the lowest activity. The trading volume mostly stays the same even under highly turbulent market conditions. The stock has a tiny market capitalisation, which usually makes its trading liquidity erratic and unpredictable. 

No other major risks have been identified.

The risk of default is moderate. We note strong debt servicing capacity, adequate interest coverage, solid cash flow generation, and an favourable capital structure, among the positive credit factors. Among the negative credit factors, we point to weak positions in its industry, slow historical revenue growth, and poor working capital management.

In highly turbulent market conditions, GROBTEA.NS is as volatile as an index. In other words, the stock will move with the index in times of extreme market volatility or shocking company news. Standalone, the worst-day losses (less than 1% of the time) will likely be limited. 

In normal market circumstances, GROBTEA.NS is volatile. Put differently, without outstanding market volatility or shocking company news, the stock's price will move much wider than the index. The stock's losses on its worst days (less than 1-5% of the time) will range from limited to average. We would also like to highlight the average intraday volatility of the instrument. 

From both historical and forecast perspectives, the stock is moderately underpriced compared to similar stocks. In particular, the stock is underpriced on P/E, 'cheap' on EV/EBITDA, trading at neutral levels on P/FCF. 

The Grob Tea Company Limited

₹ 950.9

3

The Grob Tea Company Limited

₹ 950.9

3

Risk factor

Profitability factor

Risk / Profitability

Risk factor

Profitability factor

₹ 950.9

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