This liquor stock rallied almost 96% in 15 trading sessions; should you buy now?

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Shares of Globus Spirits are on a tear and have rallied over 96% in 15 trading session from Rs 320.85 on June 1, 2021, to Rs 628.60 at 11:30 am today. In fact, during the week since June 14, 2021, till date the stock has surged over 55.6% led by strong March quarter results hitting an all-time high of Rs 633.90 in morning trades on the NSE.

Globus Spirits is the largest grain-based ENA (Extra Neutral Alcohol) manufacturer in India with a capacity of 160 million litres. The company is a reputed IMFL (Indian-made foreign liquor) player with a presence in West Bengal, Rajasthan, Haryana, and Bihar.

Stellar performance

For the quarter ended March 2021, the liquor company reported a more-than-double consolidated profit at Rs 50.63 crore amid strong revenue, as compared to Rs 19.35 crore in the same period a year ago. The company’s gross revenue grew 66% year on year (YoY) at Rs 491 crore, backed by an increase in both volume and value, mainly in the consumer business segment. The share of the consumer business (value segment) increased by around 900 basis points (bps) YoY from 35% in Q4FY20 to 44% in Q4FY21.

EBITDA (earnings before interest, taxes, depreciation, and amortisation) margin grew by over 1140 bps YoY to 24.9% in Q4FY21 from 13.5% in Q4FY20, on account of a higher share of consumer business, and better realizations on ENA (Extra Neutral Alcohol) and ethanol. The company said higher EBITDA margin coupled with lower finance cost drove profitability at PBT (profit before tax) level.

On annual basis as well, the company reported stellar performance with Gross revenues soaring to Rs 1,672.13 crore in FY21 from Rs 1,267.43 crore in FY20 up by 32%. Whereas its profit after tax rose at a much faster rate of 183% to Rs 140.82 crore from Rs 49.7 crore during the same period. Even on the operational front, the company reported an EBITDA jumped from Rs 128.48 crore to Rs 261.26 crore implying a growth of 103.4%.

Outlook

Bharat Chhoda & Harshal Mehta, analysts at ICICI Direct are bullish on the stock and expect the stock to touch Rs 690 in the near term. “Globus Spirit has been a beneficiary of the changing dynamics in the liquor space. The management has been at the forefront in capturing the opportunities. On the IMIL (Indian Made Indian Liquor) front, the company expects more premium price points in the value segment led by higher strengths (>40%) in IMIL space (e.g. Rajasthan medium liquor) while on the ENA front, the management continues to expand its facilities in deficit states (to gain higher realisation and utilisation levels). Hence, with higher revenues and elevated margins, free cash flow yield is expected to remain high,” noted the report released by ICICI Direct.

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