Overview
Tesco Plc (TSCO) is a UK based company that is into grocery retail business. The company operates worldwide and the United Kingdom, Ireland, the Czech Republic, Hungary, Poland, Slovakia, Malaysia, and Thailand are the major markets. The company is also into retail banking & insurance services. The company serves millions of customers and have more than 6,800 stores globally. The company is the leading retailer has an employee strength of 440,000.Its key peers are J Sainsbury and WM Morrison Supermarkets Plc.

Recent News
On 21st April 2019, the Tesco Plc launched its new Meat and Veg range of meat items. The product is targeted to attract health-conscious consumers. Under this product range, the company provide a wide range of beef and lamb products in combination with vegetables. The product range is categorised as healthy diet food and will reduce kitchen time as well. The company launched a new product range as a result of feedback given by customers who are looking for a healthy diet.

Financial Highlights (Continuing Operations) - FY2019 (£, million)

(Source: Annual Report, Company Website)
 
The company reported revenue of £63,911 million for the Financial Year 2019 as compared to £57,993 million in the financial year 2018. There was an increase of 11.2 per cent in revenue based on actual exchange rate, due to an increase in sales of UK & ROI segment of the company. The company’s reported operating profit had increased significantly by 34 per cent based on AER to £2,206 million in FY19 as compared to £1,646 million in FY18. The UK & ROI and Central Europe had contributed the majority of Operating profit with £1,537 million and £186 million respectively. The company’s statutory profit before tax was increased to £1,674 million in FY2019 as compared to £1,300 million in FY2018, up by 28.8 per cent based on AER as compared to last year. The company’s Dividend per share was increased by 92.3 per cent based on AER from 3.00p in FY 2018 to 5.77p in FY2019. The company displayed the ability to generate cash flow of £2.5 billion from retail operations in FY2019.

Share Price Performance

Daily Chart as at April-23-19, before the market close(Source: Thomson Reuters)
 
On 23rd April 2019, at the time of writing (before the market close, GMT 10:05 AM), Tesco Plc shares were trading at GBX 253.30, up by 1.28 per cent against its previous day closing price. Stock's 52 weeks High and Low is GBX 266.80/GBX 187.05. The outstanding market capitalisation was around £24.49 billion with a dividend yield of 2.31 per cent.
 
Valuation Methodology


Conclusion
The group has continuously improved the quality and value of service and offers and is well positioned to deliver strong, sustainable returns. The company remains on target to reach its medium-term aim of reducing cost by £1.5 billion; savings of £1.4 billion to date has been achieved. The group also seeks to improve its operating margins in between 3.5% and 4.0% by 2019/20 by improving the mix across geographies, channels and products. The company’s latest product range” Meat & Veg” is set to target the customer base of 22 million all across Britain. The company is placing an increasing focus on growth in free cash flow and earnings and continues to strengthen its balance sheet. However, the company continues to face increasing risk from changing competitive landscape and price pressures across most of its markets. Based on the above rationale and stock which is already trading around its 52w high, we have given a Hold recommendation at the closing price of GBX 250.10 (as on 18th April 2019).
*All forecasted figures and Peer information have been taken from Thomson Reuters.

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