Globus Spirits - Company Update - ICICI Securities

Globus Spirits reported strong results owing to a significant improvement in margin profile. Though revenues stayed flattish at Rs. 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 increased from Rs. 5 crore in Q4FY19 to Rs. 19.4 crore in Q4FY20.

Valuation & Outlook

The company is riding on twin engines of higher utilisation and a strong product realisation (ENA, IMIL). Newer brands for IMIL (like "Goldee" launched in West Bengal) and newer opportunities for ethanol utilisation would lead to greater usage of captive ENA. GSL saw a strong improvement in EBITDA margin (~10.7% in FY20 from 8.9% in FY19). We expect margins to be rangebound at 9.5-10.5% for FY21E and FY22E. Also, the company is planning to rationalise high cost debt and debt repayment, which should reduce interest cost and aid in improving profitability. We expect flat growth in revenue, EBITDA for FY20-22E but PAT is expected to grow at 12% CAGR, mainly due to lower interest expense. Subsequently, due to lower stock price, FCF yield is expected to stay elevated. We maintain BUY rating on the stock with a target price of Rs. 160, valuing the business at ~7x FY22E EPS.

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_Globus_CoUpdate_Jun20.pdf

Shares of GLOBUS SPIRITS LTD. was last trading in BSE at Rs.130.7 as compared to the previous close of Rs. 118.85. The total number of shares traded during the day was 4820 in over 60 trades.

The stock hit an intraday high of Rs. 130.7 and intraday low of 130.7. The net turnover during the day was Rs. 629974.

Source : Equity Bulls

Keywords