GM BREWERIES- A POTENTIAL MULTIBAGGER!

Article as on 3rd August, 2018:

**ABOUT COMPANY**

             GM Breweries was incorporated in the year December 1981. The company is engaged in the manufacture of alcoholic liquor. It blends and bottles alcoholic liquor and concentrates more on country liquor. It has its manufacturing unit in Thane district of Maharashtra with installed capacities of 82.6 million bulk liters of country liquor and 12.4 million bulk liters of Indian made foreign liquor. 

              The company markets its products brandy, rum and whiskey under brand names Pioneer Doctor Brandy, Pioneer Special Doctor Brandy, Hot Shot Rum and Reporter Choice Whiskey. The company has imported oakwood barrels to mature the whiskey in order to impart the liquor with the correct character, color, strength and distinctive taste.

                The company has a major presence in Mumbai, Navi Mumbai and Thane and is the single largest manufacturer of country liquor in Maharashtra.

**PRODUCTS**

1) GM SANTRA

                 The most leading and Prestigious blend, made from Molasses based recitified spirit. Ruling at No. 1 Position amongst Country Liquor Industry for the past 12 years, in the State of Maharashtra.

2) GM DOCTOR

                 One of the most precious brand made of sugarcane juice spirit Flavour and is ruling the market last 25 years.

3) GM LIMBU PUNCH

                 A mixed punch blend of Lemon and lime flavours along with rectified spirit from MPVD plant. 

**FINANCIALS**

                Almost all the sales comes from country liquor. It contributes more than 25% market in Maharashtra. It is the largest manufacturer of country liquor in Maharashtra. 

                Their main raw material is rectified spirit. Raw material cost as a percentage of sales is lowest when compared with last 2 years.

Mar 2016: 18.27%

Mar 2017: 20.21%

Mar 2018: 17.30%.

As per AR the price fluctuations and the shortage can affect the OPM. 

                  The profits have been increasing over the last 3 years.

Mar 2015: 18.63crs

Mar 2016: 58.31crs

Mar 2017: 43.92crs

Mar 2018: 72.90crs.

The profits will continue to increase over the next 3-5 years.

                  It has a capacity of 13.76 Crore Liter per annum. Currently, 49.20% is in use. The capacity utilisation of the co is as follows:

2010: 42%

2011: 44.40%

2012: 45.39%

2013: 47.13%

2014: 43.39%

2015: 45.43% 

2016: 46.15%

2017: 46.56%

2018: 49.20%

It might not require any capacity expansion for next 5 years atleast(mentioned innAR2017-18). 

                  Company generated highest cash flow in last 3 years. Finance cost decreased by more than 85%. Company's non current investment increased by 107.7crores in last 2 years. The company received dividend income. The company invested more than 62crs in FDs. Invested around 12crores in other plants and assets.

                    

Cons:-

1) The recent OPM was 7%. This decrease in OPM is seen despite a decrease in raw material, employee/selling and admin/Power and fuel expenses.

2) The Company has been facing difficulty also due to

very high levels of taxation and frequent changes in

laws. In fact the exorbitant rate of taxation is one of

the factors, which breeds duty evasion. 

3)  The high level

of fluctuations in the prices of its main raw material

as well as acute shortage

in the availability of Spirit are the constraints faced by the company for past several years.

**INDUSTRY**

                    According to the 68th report of the National Sample Survey Office (NSSO) on Household Consumption of Various Goods and Services in India, in 2011-12 (the last year for which the data is available), per capita alcohol consumption in rural India increased by nearly 28 per cent, while that of urban India rose by nearly 14 per cent.

                    The two states in the southern part of the country, i.e. Andhra Pradesh and Telangana are the highest alcohol consuming states in India. According to the NSSO data, Karnataka consumes 101 ml of foreign liquor/wine over 30 days while neighbouring Maharashtra drank a mere 10 ml over the same period.

                   The Indian Made Foreign Liquor (IMFL) segment is estimated to be valued at more than INR 3,000 Bn by 2026, expanding at a CAGR of 5.2% over the forecast period.Rapid increase in urban population is one of the key factors that is boosting the India alcohol market. Traditionally, brown spirits have been targeted at the urban consumer. As such, increasing urban population coupled with factors such as increasing disposable income and growing preference for whiskies is expected to create avenues for growth of the alcohol market in India. Changing demographics is further expected to boost the India alcohol market. As of 2014, over half the country’s population (53%) was above the age of 25 years. Moreover, estimated median age of the country’s population for the same year was pegged at 27 years. The legal drinking age in India varies from state to state. For instance, 18 years in Goa, Uttar Pradesh and Karnataka; 21 years in Tamil Nadu and Andhra Pradesh; and 25 years in Maharashtra, Delhi and Punjab.

                    While many frown at the way India is guzzling, others say it’s encouraging how, with time, several taboos fell by the wayside. “There is so much more exposure today. People travel, their entire way of thinking has changed. Enjoying a drink is not such a big thing anymore,” says Adarsh Shetty, president of the Indian Hotel and Restaurant Association of Maharashtra. His state recorded an annual consumption of 3,228.28 lakh bulk litres of country liquor in 2016, the most preferred alcoholic drink in the state.

                   Sociologist Bhaichand Patel, who authored Happy Hours: The Penguin Book of Cocktails in 2009, says the “situation has changed remarkably, especially for women”. “Earlier, women who drank were frowned upon. My wife wouldn’t drink before my parents, but my daughter has no qualms about drinking with us. That is the change,” he says, noting how “India did not have a culture of drinking.” “Before the 1960s, both Delhi and Mumbai were dry. Even five-star hotels didn’t serve alcohol. The only people who could drink were foreigners. Some of us got rum from the Navy canteen. We got a bottle of Black Knight whiskey for Rs 50. Even the rich had Indian whiskey in the ’70s. Not any longer,” says Patel, adding that India remains the largest consumer of Indian whiskey, and comes second only to the US in consumption of Scotch whiskey.

(OVERALL INDUSTRY IS HIGHLIGHTED AND AMONG DIFFERENT STATES ONLY THE MAHARASHTRA STATE IS FOCUSED!)

                     

**SHAREHOLDING PATTERN**

                     Promoters hold around 74.43%, and promoter with highest holding is JIMMY WILLIAM ALMEIDA who holds 61.76%. second highest promoter holding is ALMEIDA HOLDINGS PVT LTD holding 10.68%. They're is no change in promoter holding since last 1 year. There are no pledged shares. Highest public shareholder is MUKUL MAHAVIR AGRAWAL who holds 1.71%. 18 FIIs have invested in the company whose total holding is 2.43%. FIIs have increased 0.24% of their holdings compared to march Qtr. MF holdings have also increased by 0.29% since last Qtr.

**TECHNICALS**

                      After touching all time high of 969 the scrip corrected more than 25% lingering around 700 levels. The charts show strong support around 665-680 levels. Below these levels the scrip can dip to 630-610 levels, where the scrip must be averaged. Immediate resistance around 740-755 zones and long term resistance level around 938-955 levels. 

**MY TAKE**

                     CMP 705 may not be the bottom and share price can be seen even around 685 levels. The company posted great quarter results. More than 15% increase in topline and more than 115% increase in bottomline. There was a decrease in Raw material prices and an increase in other incomes. Overall results were quiet good. If the company continues to post such good numbers to continue throughout then we can expect a 3-5x returns.

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