Globus Spirits Ltd. - Initiating Coverage - BUY - Dugad Finserv

Globus Spirits Ltd (GSL) is Delhi based diversified beverage alcohol company with its presence in nine states and an only company in the domestic markets with a unique 360 degree business model.

Capacity expansion to drive volume growth

GSL has completed the capacity expansion programme at its two state of the art distilleries at Samalkha, Haryana & Behror, and Rajasthan from 28.6 mn BL to 70 mn BL. Further the merger of demerged undertaking of ADL with the company adds another 14.4 mn BL of capacities. Thus the total installed capacity of GSL currently stands at 84.4 mn BL. Bulk alcohol & franchisee bottling are the direct beneficiaries post the capacity expansion and increased volumes in the these two segments is expected to drive growth for GSL.

Market leader in the IMIL space in North Indian markets of Haryana, Delhi & Rajasthan

GSL has been able to sustain its leadership position in North India in the IMIL space through its flagship brand "Nimboo" This has resulted in the company's market share increasing to 27% from 20% in Haryana. GSL has a leadership position in the states of Delhi and Rajasthan with a decent market share at 25% & 24% respectively.

New product launches and entry in new states on the cards

During FY13 GSL is all set to launch new products and make its presence in newer states. It is planning to launch new products in the IMFL semi premium brand segments for Whisky & Brandy. Also the company is looking to make its entry in the 2-3 newer states in the Eastern region. GSL has also bagged the license in the state of Jharkhand.

Valuation

GSL is currently trading at 6.1x & 3.8x its FY12E & FY13E earnings of Rs 18.1 & 28.9 respectively. On P/B it is trading at 1.0x & 0.8x its FY12E & FY13E book value which is very attractive. We recommend "Buy" on the stock as it has got tremendous potential to scale up further heights from the current levels.

Source : Equity Bulls

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