Ventura Securities report on Associated Alcohols and Breweries
Associated Alcohols & Breweries Ltd (AABL) is one of the most undervalued stocks in the listed alcohol beverage industry. Its 5-year revenue CAGR of 9.5%, net earnings CAGR of 32.3% & FCFF CAGR of 31.8% CAGR notwithstanding the pandemic has been nothing but spectacular. This, coupled with its prudent capital allocation, has resulted in the RoIC expanding to an enviable 41.2% (+1,705 bps since FY16). We expect the momentum to gather further steam with revenues/ net earnings/FCF growing at 18.8%/14.6%/19.1% CAGR over FY21-24 while sustaining the high RoIC.
Outlook
Given the compelling growth story, we believe that the stock is due for a re-rating. We initiate coverage on AABL with a BUY for a price target of INR 870 (18xFY24E EPS, ~20% discount to GSL’s current valuation) representing an upside of 105% over the next 24 months from the CMP of INR 425.
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