CLSA raises target price for Sula Vineyards, sees over 40% upside from current levels

In the past one month, the stock of this wine-maker has soared over 17 percent as against 3 percent rise in the BSE Sensex

Shares of Sula Vineyards soared 9 percent to hit a 52-week high of Rs 604.9 per share on January 8 after CLSA shared a 'buy' rating on the counter. The global brokerage firm has raised the target price of the winery to Rs 863 per share from Rs 571 apiece, implying an upside of 42 percent from current levels.

In the past one month, the stock of Sula Vineyards has gained over 17 percent as against 3 percent rise in the BSE Sensex. Earlier, Sula Vineyards shares touched 52-week high of Rs 567 per share on January 5, 2024.

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Highlighting the rationale behind the target upgrade, analysts at CLSA believe that Sula Vineyards is best placed to benefit from wine catch-up penetration. The brokerage firm has raised FY24-26 estimates up to 4 percent.

"Maharashtra government has reinstated subsidy on wines produced and sold in the state for more than 5 years. This should shift focus to volume opportunity, with Sula benefiting the most as it is a clear market leader with more than 50 percent market share in wines," analysts said.

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As per the Maharashtra government's wine industrial promotional scheme, the wineries that have paid 20 percent value added tax (VAT) during the last 3 fiscal years (2020-21 to 2022-23) will get tax refunded for the period. Starting this fiscal, the wineries need to pay 20 percent of the total wine sales in Maharashtra to the state government as VAT.

Earlier, Sula Vineyards had declared that their wine tourism business had set new records for visitor numbers, revenues, and tastings over the long Christmas weekend.

"Over 5,000 visitors entered the gates of Sula on a single day for the first time on December 24. Visitor numbers set a single-day, two-day, and three-day record with over 12,000 visitors from December 23-25 at Sula’s Nashik and Bengaluru wine tourism facilities," the company said.

Tastings, a major focus of Sula’s wine tourism, also set a record with over 5,300 individual tastings over the 3 days, a jump from the previous 3-day record of 4,700 tastings over Independence Day 2023.