Man­pasand Bev­er­ages Ltd

Money Times - - NEWS -

(BSE Code: 539207) (CMP: Rs.120.85) (FV: Rs.10) By Rahul Sharma

Man­pasand Bev­er­ages Ltd (MBL) raised around Rs.500 crore through its IPO priced at Rs.320/share in June 2015. Backed by QIPs, FIIs and Mu­tual Funds, the stock has been on a firm pedestal for the last two years. It is the only listed com­pany in the non-al­co­holic bev­er­ages sec­tor. Its brands are pop­u­lar in ru­ral and semi-ur­ban re­gions be­cause of its Rs.10 pack prod­ucts. How­ever, the sud­den exit by Deloitte, Hask­ins and Sells on 23 May 2018, one week be­fore its FY18 re­sults, has up­set the sen­ti­ment of the in­vestor com­mu­nity. Sur­pris­ingly, the au­di­tors in their fil­ing with the RoC re­marked ‘NIL’ rea­sons un­der Sec­tion 140(2). Taken aback by the devel­op­ment, the stock re­tracted around 50% in the fort­night fol­low­ing the event.

MBL is the only In­dian com­pany that has a tie-up with Parle for its prod­ucts. It has the largest dis­tri­bu­tion and man­u­fac­tur­ing foot­print in In­dia with 7 man­u­fac­tur­ing fa­cil­i­ties in Vadodara, Ambala, Varanasi and Dehradun. It com­mis­sioned its new Rs.170 crore man­u­fac­tur­ing fa­cil­ity at Varanasi in Au­gust 2018, which has a ca­pac­ity to pro­duce 50,000 cases a day. Fur­ther, its plant at Sri City in Andhra Pradesh will be ready in the next 3-4 months while its fa­cil­ity at Khurda in Odisha will also be set up soon.

Fi­nan­cial Per­for­mance: MBL is the only In­dian com­pany in the non-car­bon­ated fruit drink in­dus­try that has con­sis­tently grown in dou­ble-dig­its. For FY18, it re­ported 34% higher sales of Rs.984.95 crore with 38% higher PAT of

Rs.99.99 crore. EBIDTA grew 32% to Rs.207.43 crore. Its EPS was Rs.8.74 v/s Rs.6.35 in FY17. It de­clared 10% div­i­dend for FY18 on an eq­uity cap­i­tal of Rs.114.46 core (post 1:1 bonus in Septem­ber 2017). Its share book value works out to Rs.108.9.

Dur­ing Q1FY19, it re­ported marginally higher PAT of Rs.36.38 crore on 9% higher sales of Rs.340.07 crore with an EPS of Rs.3.18. Ac­cord­ing to the man­age­ment, is­sues un­re­lated to op­er­a­tions caused some spillover and im­pacted its busi­ness in June 2019. How­ever, op­er­a­tions have nor­mal­ized since July and the man­age­ment is con­fi­dent of main­tain­ing its growth rate go­ing for­ward.

Mar­ket Op­por­tu­nity: The ~Rs.13500 crore non-al­co­holic bev­er­ages mar­ket in In­dia is one of the fastest grow­ing sec­tors. The In­dian juices mar­ket is fore­cast to grow at 23% CAGR over FY15-21 while the car­bon­ated mar­ket is fore­cast to grow at 9.6%. Within this seg­ment, the Mango drink seg­ment con­trib­utes more than 50%. The ru­ral mar­ket, which cur­rently ac­counts for one-third of the to­tal mar­ket, is set to grow to 50% in the next 5 years on the back of ris­ing in­come (aided by govern­ment ef­forts) and com­pet­i­tive prod­uct and price of­fer­ings.

Con­clu­sion: The man­age­ment be­lieves that MBL’s en­try into new prod­uct seg­ments like milk-based drinks, fruit-based su­gar-free drinks, glu­cose drinks and pro­tein-based drinks will gen­er­ate in­cre­men­tal rev­enues over the next 3 years and boost its prof­itabil­ity. Con­sid­er­ing all these pa­ram­e­ters, we rec­om­mend this stock for a price tar­get of Rs.180-190 in the long-term.

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