Is it right time to buy G.M. Breweries?

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G.M.Brewer  (Image  Source: Website of GMBL)

 

About G.M.Breweries Ltd:

G.M Breweries is one of the Multibagger stock of this decade. It gave multi-bagger returns to investors who spotted it in 2010 when it was trading in two digits only.  The 52-week high price of G.M. Breweries is 1057.95 and 52-Week low price is 491. This company is one of the best fundamentally strong small-cap company in the beverages and distilleries segment. The company was incorporated in December 1981 by Mr. Jimmy William Almeida. His aim was to create a quality country liquor brand available at cheaper prices for a cost-sensitive segment. It went public in 1993 when Almeida decided to share his wealth among stakeholders. GMBL  featured in Forbes 200 companies list. As per the website of G.M. Breweries, GMBL is engaged in activities of manufacturing and marketing of alcoholic beverages; such as Country liquor (CL) and Indian Made Foreign Liquor (IMFL).

The GMBL company has state of the art fully automatic bottling plant in Virar, Palghar district of Maharashtra State, India.  It has a capacity of 13.76 Cr liter per annum. Around 49% of the capacity is being utilized to manufacture 50,000 cases a day. GMBL is a pioneer of introducing country liquor in PET bottles and also introducing 180 ml liter bottles in CL market. It boasts of 70% of Market share in Country Liquor in Mumbai, Navi Mumbai, and Thane areas while 25% market share in entire Maharashtra where it faces fierce competition with an unorganized player in CL category. G.M.Breweries has 4 main products in CL categories wiz. G.M. Santra, G.M Doctor, G.M. Limbu Punch, and G.M. Dilbahar Saunf. Apart from these it also markets its products brandy, rum and whiskey under brand names like Pioneer Doctor Brandy, Pioneer Special Doctor Brandy, Hot Shot Rum and Reporter Choice Whisky. But the most leading and prestigious blend of GMBL remains G.M. Santra which is made from premium distilled molasses based rectified spirit of Multi Pressure Vaccum Distillation Plant. G.M. Santra is no.1 Country Liquor brand in Maharashtra from last 12 years thanks to its Orange Blended organoleptic taste and aroma. Gas Chromatography is used to ensure the consistency of blend.  Clarity of liquor is due to fine filtration from 0.4-micron resin bonded cellulose cartridge filtration system.

G.M.Breweries Plant

Basic Fundamental Analysis of G.M. Breweries:

ParticularValueParticularValue
Market Cap (Rs CR)1228.07Face Value10
P/E13.87Industry P/E66.61
Div (%)30%Div yield (%)0.45%
EPS48.46P/C12.99

As  per the table data above recorded on 1st Dec 2018

1) You can see P/E of GMBL is very low compared to Industry P/E.  It is undervalued

2) The company gave 30% dividend  (Rs 3 per share) which makes it good investment stock too.

ParticularMar 18Mar 17Mar 16Mar 15Mar 14
Total Revenue (Cr)435.60379.18365.72309.70289.20
Total Expenses (Cr)324.31312.18281.29281.24256.56
Profit After Tax (Cr)72.9043.6458.3118.6321.54

As per the table data above

1) Revenue of G.M. Breweries is consistently increasing and so as the Net Profit (except the dip in 2017)or thanks to the increase in changes in inventory of FG, WIP, and Stock in trade.

2) While Sales in 2017 saw hike due to the ban on Poisonous Liquor in Maharashtra which may have increased demand for CL.

Shareholding Pattern

Promoter holds 74.43%, FIIs 2.38%, FIIs 0.3%  FIIs have increased their holding gradually.

Total debt/ Equity ratio is 0 for 3 consecutive years. The company is  Debt free and Cash rich.

Average ROCE is 26%  and Average ROE is 24%

Company’s Net Worth has increased over the year and it has not yet its capacity fully.

It means if it starts Double Shift company can easily increase its Production remaining Profitable and it can easily penetrate in other states too.

This company has got enough experience now and it can definitely go for some Corporate Action now. It can enter in Foreign Markets like other Asian Countries first where CL type cost-sensitive segments can be targeted.

G.M. Breweries had land in Wada, Thane too which can be used for expansion purpose in future.

Is it right time to Buy G.M.Breweries?

CMP of GMBL on 1st Dec 2018 is 670 on NSE. The stock is close to its important support of 665. It can reach 1000 again in the year 2019 if Maharashtra Government doesn’t include a decision to Ban Liquor in Maharashtra in its Manifesto. Govt is yet to decide GST level for Liquor segment. If it brings CL in a lower bracket, our target will be easily achieved.

We are all aware of ‘Election time malpractices’ by Political parties in India, liquor consumption always increases during this period. Before 2019 Loksabha Election I see tremendous demand in CL category of liquor. GMBL will be the prime beneficiary.

Also in the Winter, December is the month of highest consumption of liquor in India thanks to chilling cold and Christmas-New year vacations.

To Summarize, G.M. Breweries is actually well-placed right now. The risk to Reward ratio is favorable in GMBL and one can definitely invest in it from the short-term view of 850 (most conservative target).

(Disclaimer:  Stocksbaazigar Mr. Deepak Doddamani is not a SEBI registered Advisor. He is NSE’s Certified Investment Analysis Professional and NSE’s Marketing Professional Level – 4. Please consult your Financial Advisor before taking any investment related decisions. Stocksbaazigar is not. responsible for any of your Gains/Losses. Thank you.)


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