Buy Globus Spirits; target of Rs 160: ICICI Direct

ICICI Direct's research report on Globus Spirits

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.

Outlook

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.

Globus Spirits 18062020

For all recommendations report, click here