Tesco Plc (LON: TSCO)

Business Overview
Tesco Plc is a United Kingdom-based retail company and is one of the largest retailers of consumer goods in the world, serving millions of customers every week through stores as well as online space. The company mainly operates as a retailer of grocery products. It also offers insurance and retail banking services. The group operates in Retail segment and Tesco Bank. The Retail division is further divided into three geographical segments: UK & ROI, Asia and Central Europe.

Financial Highlights – H1 Financial year 2020 (31^st August 2019, GBP)

(Source: Interim Report, Company Website)

In the first half of the financial year 2020, the company’s sales grew by 0.1 per cent at actual rates basis to GBP 28.3 billion as compared to H1 FY 2019 due to the company’s refocus on its general merchandise offer on sustainable, profitable categories and due to the depreciation of Sterling. Statutory revenue’s increased by 0.6 per cent at actual rates basis to GBP 31.9 billion as compared to GBP 31.7 billion in H1 FY 2019. It also includes fuel sales of GBP 3.6 billion. Statutory operating profit of the company grew by 12.6 per cent to GBP 1,134 million against H1 FY 2019 due to the impact of exceptional items and amortisation of acquired intangibles. The company’s statutory profit before tax was GBP 494 million, up by 6.7 per cent. The company declared a dividend of 2.65p during the period.

Share Price Performance  

Daily Chart as on 19^thDecember 2019, before the market closed (Source: Thomson Reuters)

On December 19^th, 2019, Tesco Plc shares were trading at GBX 250.90 at the time of writing before the market close (at 12:10 PM GMT), down by 0.32 per cent against the last day closing price. Stock's 52 weeks High and Low are GBX 260.40/GBX 187.05. The stock is in an uptrend in short as well as the long term. It has delivered 30 per cent return in the last one year, and 6.72 per cent in the last one month.

Conclusion
The company has delivered a decent financial performance in the first half of the fiscal year 2020. The external conditions are challenging, and the company is facing challenges in the Central Europe business sales. There are some uncertainties such as Brexit, macroeconomic environment, etc. but still the company has delivered its turnaround plan and transform its business. The company is expecting the second half of the fiscal year 2020 to be better than the first half of FY 2020. The company is in a strong position to generate sustainable growth, and it is looking attractive to invest for the long term.

The company’s total revenue has grown from GBP 56,925 million in FY2015 to GBP 63,911 million in FY2019, giving approximately 3 per cent growth on a CAGR basis.


Based on the above rationale, we have given a "HOLD" recommendation at the current price of GBX 250.70 (as on 19th December 2019, before the market close at 1:05 PM GMT).

Antofagasta Plc (LON: ANTO)

Business Overview
Antofagasta Plc is a London, United Kingdom-based copper mining company. It is mainly engaged in the activities related to exploration, evaluation and mining of copper in Chile.

Recent News
On 4^th November 2019, the company announced its production guidance update. The group reported that all its mines are now back in operation after a phase of unrest that had gripped the Chilean region. The loss of copper production is expected to be around 4 thousand tons. The company revised its total production target for the year 2019 to 750,000-770,000 tons from the 750,000- 790,000 tons guided previously.

Financial Highlights – H1 Financial year 2019 (30^th June 2019, $, million)

(Source: Interim Report, Company Website)

In the first half of the financial year 2019, the company’s revenue grew by 19.1 per cent to $2,525.6 million as compared to the first half of the fiscal year 2018 due to an increase in gold revenues and a 25.1 per cent increase in copper sales volumes. As revenue rose due to a higher production of cooper, the EBITDA also increased by 44.4 per cent to $1,305.9 million, and EBITDA margin grew to 51.7 per cent in H1 FY 2019. Profit before tax for the first half of 2019 increased by 63.9 per cent to $763.0 million as against $465.6 million in H1 FY18. The profit for the period stood at $490.4 million in H1 FY2019 as compared to $315.7 million in the first half of the fiscal year 2018. The earnings per share from continuing and discontinued operations stood at 30.7 cents in H1 FY19 as compared to the 19.8 cents in H1 FY2018. During the H1 FY2019, the net debt stood at $517.4 million. It represents a net debt to EBITDA ratio of 0.20x. The interim dividend per share was 10.7 cents, an increase of 57.4% as compared with the same period of last year.

Share Price Performance  

Daily Chart as on 19^thDecember 2019, before the market closed (Source: Thomson Reuters)

On December 19^th, 2019, Antofagasta Plc shares were trading at GBX 933.40 at the time of writing before the market close (at 12:45 PM GMT), down by 0.49 per cent against the last day closing price. Stock's 52 weeks High and Low are GBX 1,026/GBX 727.60. The stock is in an uptrend in short as well as the long term. It has delivered 18.75 per cent return in the last one year, and 4.2 per cent in the last one month.

Conclusion
The company has reduced its full-year copper production estimates due to the unrest in Chile. Mines' supplies were disrupted due to the blockage of roads. There was some damage to ancillary infrastructure outside the mines’ perimeter, which would further affect the production of copper. The company has delivered a decent financial performance during the first half of the fiscal year 2019. The company is in a strong position generating decent cash flows and improving returns. It has the potential assets and capabilities to grow in a challenging external macro-environment. The company’s prospects look promising, and it could deliver sustainable growth in the long term. It provides an attractive opportunity to invest in better returns.

The company’s total revenue has grown from $3,225.7 million in FY2015 to $4,733.1 million in FY2018, giving 13.6 per cent growth on a CAGR basis.

Based on the above rationale, we have given a "HOLD" recommendation at the current price of GBX 928.60 (as on 19th December 2019, before the market close at 8:00 AM GMT).

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