Manpasand Beverages Ltd
(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.