Company Update - Globus Spirits - ICICI Securities

Globus Spirits (GSL) reported strong results owing to continued improvement in margin profile, in spite of weaker operating leverage. Revenues fell mere 22% YoY to Rs. 230 crore, compared to the liquor industry, in general (fell closer to 45-55% levels), mainly owing to stronger IMIL performance due to better state mix (Haryana performed well), higher bulk realisation (up 14%) and better-than-expected performance of newer product launches. EBITDA grew 46% YoY to Rs. 39 crore mainly due to strong expansion in EBITDA margin (clocked highest ever EBITDA margin of 17.1% vs. 9.1% in Q1FY20, led by higher gross margins, lower fuel, freight & power cost). Subsequently, PAT grew 1.6x to Rs. 19 crore.

Valuation & Outlook

In Q1FY21, IMIL, bulk volumes suffered (down ~33%) due to complete lockdown in April and a recovery in May. Volumes have reached normalised levels in June. The management expects volume growth in Q2. Newer brands for IMIL (Goldee, IMIL brand with IMFL like 42.7% alcohol concentration) and newer opportunities for ethanol utilisation would lead to greater usage of captive ENA. We expect margins to be rangebound at 14-15% for FY21E, FY22E. Also, GSL is planning to lower debt, which should reduce interest cost and aid in improving profitability. Subsequently, FCF yield is expected to remain elevated. We maintain BUY rating on the stock with a target price of Rs. 220, valuing the business at ~6x FY22E EPS.

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_Globus_CoUpdate_Aug20.pdf

Shares of GLOBUS SPIRITS LTD. was last trading in BSE at Rs.177.7 as compared to the previous close of Rs. 169.25. The total number of shares traded during the day was 110758 in over 708 trades.

The stock hit an intraday high of Rs. 177.7 and intraday low of 170. The net turnover during the day was Rs. 19611973.

Source : Equity Bulls

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