Globus Spirits Ltd. share price target

Growth may moderate amid disruptions

Margin pressures to persist in the near term

Spike in fuel costs impact profitability; better days ahead

Amid cost pressures, capacity addition bolsters outlook

One offs led to soft quarter, long term growth remains intact

What should investors do? With doubling of the current capacity by FY24 to ~1230 KLPD, GSL plans to capitalise on the changing dynamics in the liquor space. Further, growing opportunities in IMIL space (better price points and growing...

Optimal capital allocation: GSL has been a beneficiary of changing dynamics in the liquor sector and has seen strong FCF inflow (upwards of 6-7% FCF yield). However, in spite of the record yield, the management has resorted to allocating the incremental capital towards its core strength of building newer ENA capacities and slowly building its consumer portfolio and has not been swayed by ambitions of allocating greater capital to...

Robust business model driving medium-term growth

USL is India's leading alcoholic beverage company and subsidiary of global leader Diageo plc. It manufactures, sells premium liquor brands such as Johnnie Walker, Black Dog, Black & White, Vat 69, Antiquity, Signature,...

While FY21 saw overall muted utilisation levels (86% vs. 91% in FY20), resumption of business in H2 again saw utilisation peaking to 90%+ levels. Also, while the company's 140 klpd West Bengal plant is on track (completion by Q2 end), the management is planning to embark on further expansion of the plant (completion by next year) by another 140 klpd (280 klpd in total) and would require investment of | 110 crore (via internal accruals). The management also plans to construct two other plants in Jharkhand and Bihar (220 klpd in total) by FY23, at an outlay of | 225 crore...

Utilisation reached ~95% in Q2 (sharp increase from Q1 levels). While utilisation is expected to remain at peak levels, the company is embarking on a capex programme to increase the overall capacity by ~5 crore litre (increase of ~25%) with an outlay of | 95 crore (as per the management, 40% lower capex than a facility of similar size). The facility would be put up in West Bengal (ENA deficit state) and is expected to be commercialised in Q2FY22. Long term ethanol procurement by Government of India is expected to keep stronger ENA realisation while newer product launches...

Ensuring stable performance due to diverse segments GSL covers entire value chain of alcohol manufacturing undertaking an array of operating activities from manufacturing extra neutral alcohol (ENA) to contract bottling of Indian made foreign liquor (IMFL), to marketing & selling IMIL and several by-products. IMIL (~36% of net revenue in FY20) includes Rajasthan as the dominant contributor (~75-80% of IMIL revenues, ~30% market share in the state). Also, the company's JV Unibev' (90% owned, 10% owned by former USL MD Vijay Rekhi) has launched three IMFL liquor...

Globus Spirits reported strong results owing to a significant improvement in margin profile. Though revenues stayed flattish at | 271.5 crore, lower raw material cost led to 720 bps YoY improvement in gross margin to 42%. In spite of higher employee and other expenses, the company registered a 620 bps YoY improvement in EBITDA margin to 13%. Consequently, net profit...

We recently met the management of Globus Spirits (GSL), one of the leading players in the Indian made Indian liquor (IMIL) segment. Over the years, GSL has successfully got transformed from a grain-based bulk alcohol manufacturer to a 360 alcohol beverage (alcobev) segment player. GSL covers the entire value chain of alcohol manufacturing undertaking an array of operating activities from manufacturing extra neutral alcohol (ENA) to contract bottling to marketing and selling IMIL and Indian made foreign liquor (IMFL). GSL has a manufacturing capacity...