Buy Globus Spirits; Target Of Rs 400: ICICI Direct
ICICI Direct is bullish on Globus Spirits recommended buy rating on the stock with a target price of Rs 400 in its research report dated November 12, 2020.
Nov 17, 2020 / 11:24 AM IST
ICICI Direct's research report on Globus Spirits
Globus Spirits (GSL) continued to report strong results in Q2FY21. IMIL made a come-back during the quarter (good performance in Rajasthan, Haryana) and posted 33% YoY growth in Q2, followed by 18% growth in bulk revenues (higher volumes). Net revenues during the quarter grew 20% YoY to Rs 328 crore, whereas the liquor industry in general de-grew 9-10%. EBITDA doubled YoY to Rs 60 crore mainly due to strong expansion in EBITDA margin (clocked highest ever EBITDA margin of 18.3% vs. 10.7% in Q2FY20, led by higher gross margins, lower fuel, freight & power cost). Subsequently, PAT tripled to Rs 33 crore.
GSL continues to carry out its operations in multiple shifts leading to peak asset utilisation in Q2. The management expects performance to continue in H2FY21. Newer brands for IMIL, opportunities for ethanol utilisation would lead to greater usage of captive ENA. We expect margins to remain at record levels (17-19%) for FY21E, FY22E. Also, it is actively lowering its debt, which should reduce interest cost and aid in improving profitability. Hence, FCF yield is expected to remain elevated. We maintain BUY rating on the stock with a target price of Rs 400, valuing the business at ~7x FY22E EPS.
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