Globus Spirits (GLOSPI)

CMP: | 1325 Target: | 1750 (32%) Target Period: 12 months BUY

September 20, 2021

Optimal asset allocation driving profitability…

About the stock: Globus Spirits (GSL) is the largest grain based ENA manufacturer

Company Update
in India with a capacity of 160 million litre. The company is also a supplier of Indian
made Indian liquor (IMIL) and premium IMFL in India.
Particulars
 IMIL segment comprised ~42% of consolidated revenues, with the rest
Market Capitalisation (| cr) 3,815.9
contributed by bulk alcohol (45%) and others (botting and by-products)
Total Debt (| cr) - FY21 134.0
 Total 80% of IMIL sales occurs in Rajasthan (32-33% market share) Cash (| cr) - FY21 58.1
EV (| cr) - FY22 3,891.8
Key triggers for future price performance: 52 Week High / Low (|) 1354/251
Equity Capital (| cr) 28.8
 GSL’s capacity is expected to more than double from 16 crore litre in FY21
Face Value (|) 10.0
to ~33 crore litre in two years. The management’s strategy of setting up
capacities in ENA deficit states (WB, Bihar, Jharkhand, etc) would enable
quicker utilisation at higher realisation, once commercialised Shareholding pattern
(in % ) Sep-20 Dec-20 Mar-21 Jun-21
 Post commercialisation of capacities, the management intends to build its
Promoter 55.9 55.9 55.9 56.0
consumer business in the states (~50% of FY21 revenues), by providing
Others 44.1 44.1 44.1 44.0
products at different price points and upgrading its range of offerings to
cater to different tastes. Consumerisation of its ENA capacity improves the Price Chart
asset turnover as well as realisation of per unit volume, thereby providing 1600 25000

ICICI Securities – Retail Equity Research

positive thrust to return ratios (we expect 30%+ RoCE in FY23E)
1200 20000
 The government expedited 20% blending target to 2025, leading to higher
800 15000
diversion of ENA towards ethanol and creating structural support for ENA
prices, by drying up surplus capacities 400 10000

 Optimal capital allocation: GSL has been a beneficiary of changing 0

Nov-17
5000

Nov-18

Nov-20
May-17

May-18

Nov-19
May-20

May-21
May-19
dynamics in the liquor sector and has seen strong FCF inflow (upwards of
6-7% FCF yield). However, in spite of the record yield, the management has
resorted to allocating the incremental capital towards its core strength of Globus Spirits BSE 500

building newer ENA capacities and slowly building its consumer portfolio
and has not been swayed by ambitions of allocating greater capital to Recent event & key risks
premium portfolio (capex spend limited to just | 15-20 crore)
 Commissioning of 140 KLPD
West Bengal plant
What should investors do? Globus Spirits has been a beneficiary of the changing  Key Risk: (i) Hardening of raw
dynamics in the liquor space (inflation in ENA prices and growth in IMIL space due material prices, (ii) Extension of
to better quality, higher strength and attractive product positioning). The state lockdowns
management has been at the forefront in capturing the opportunities
Research Analyst
 We remain positive on the stock and maintain our BUY recommendation
Bharat Chhoda
Target Price & Valuation: We value the stock at | 1750 i.e. 17x P/E on FY23E EPS [email protected]

Harshal Mehta
[email protected]

Key Financial Summary

5 Year CAGR
| crore FY19 FY20 FY21E FY22E FY23E 2 Year CAGR
(FY16-21P)
Net Sales 985.9 1,168.8 1,230.8 11.0% 1,433.3 1,881.9 23.7%
EBITDA 88.3 124.7 254.7 22.7% 336.8 442.2 31.8%
PAT 24.3 49.9 140.8 32.5% 213.6 293.7 44.4%
P/E (x) 156.8 76.5 27.1 17.9 13.0
M.Cap/Sales (x) 3.9 3.3 3.1 2.7 2.0
RoCE (%) 9.5 14.5 28.0 31.8 32.8
RoE (%) 6.1 11.2 24.1 26.9 27.0

Source: Company, ICICI Direct Research

 Company Update | Globus Spirits ICICI Direct Research

Financial Summary

Exhibit 1: Profit and loss statement | crore Exhibit 2: Cash flow statement | crore
(Year-end March)/ (| crore) FY20 FY21E FY22E FY23E (Year-end March)/ (| crore) FY20 FY21E FY22E FY23E
Total Operating Income 1,168.8 1,230.8 1,433.3 1,881.9 Profit/(Loss) after taxation 49.9 140.8 213.6 293.7
Growth (%) 18.6 5.3 16.5 31.3 Add: Depreciation & Amortization 38.0 40.7 47.1 53.9
Raw Material Expenses 717.6 653.2 716.7 940.9 Add: Interest Paid 23.6 18.8 13.3 7.7
Gross Profit 451.2 577.6 716.7 940.9 Net Increase in Current Assets -7.3 -89.3 0.5 -60.1
Gross Profit Margins (%) 38.6 46.9 50.0 50.0 Net Increase in Current Liabilities 33.8 28.2 16.5 43.5
Employee Expenses 34.3 38.4 50.2 65.9 Others -2.6 0.5 0.0 0.0
Other Expenditure 292.2 284.5 329.7 432.8 CF from Operating activities 135.4 139.7 291.0 338.7
Total Operating Expenditure 1,044.1 976.1 1,096.5 1,439.6 (Purchase)/Sale of Fixed Assets -32.8 -61.7 -116.7 -125.0
EBITDA 124.7 254.7 336.8 442.2 Long term Loans & Advances -4.8 1.4 0.0 0.0
Growth (%) 41.3 104.2 32.2 31.3 Investments 0.0 0.0 -30.0 -30.0
Interest 23.6 18.8 13.3 7.7 Others 10.1 -15.9 -1.3 -1.4
Depreciation 38.0 40.7 47.1 53.9 CF from Investing activities -27.4 -76.1 -148.0 -156.4
Other Income 3.7 6.6 9.0 11.9 (inc)/Dec in Loan -63.7 -3.3 -60.0 -10.0
PBT before Exceptional Items 66.9 201.8 285.5 392.5 Dividend & Dividend tax -3.3 -3.3 -3.3 -3.3
Less: Exceptional Items 0.0 0.0 0.0 0.0 Less: Interest Paid -23.6 -18.8 -13.3 -7.7
PBT after Exceptional Items 66.9 201.8 285.5 392.5 Other 0.0 0.0 0.0 0.0
Total Tax 17.2 61.0 71.9 98.8 CF from Financing activities -90.5 -25.4 -76.6 -21.0
PAT before MI 49.7 140.8 213.6 293.7 Net Cash Flow 17.5 38.1 66.3 161.4
Minority Interest -0.2 0.0 0.0 0.0 Cash and Cash Equivalent at the beginning
2.5 20.0 58.1 124.4
PAT 49.9 140.8 213.6 293.7 Cash 20.0 58.1 124.4 285.8
Growth (%) 105.1 182.2 51.7 37.5 Source: Company, ICICI Direct Research
EPS (Adjusted) 17.3 48.9 74.2 102.0
Source: Company, ICICI Direct Research

Exhibit 3: Balance Sheet | crore Exhibit 4: Key ratios

(Year-end March) FY20 FY21E FY22E FY23E (Year-end March) FY20 FY21E FY22E FY23E
Per share data (|)
Equity Capital 28.8 28.8 28.8 28.8 Reported EPS 17.3 48.9 74.2 102.0
Reserve and Surplus 418.5 556.5 766.8 1,057.2 Cash EPS 16.2 47.8 73.0 100.8
Total Shareholders funds 447.3 585.3 795.6 1,086.0 BV per share 155.3 203.2 276.3 377.1
Minority Interest -0.9 -0.9 -0.9 -0.9 Cash per Share 6.9 20.2 43.2 99.3
Total Debt 137.3 134.0 74.0 64.0 Dividend per share 1.2 1.2 1.2 1.2
Deferred Tax Liability 33.6 59.3 59.3 59.3 Operating Ratios (%)
Long-Term Provisions 2.8 3.0 3.1 3.1 Gross Profit Margins 38.6 46.9 50.0 50.0
Other Non Current Liabilities 3.7 7.7 7.8 8.0 EBITDA margins 10.7 20.7 23.5 23.5
Source of Funds 623.8 788.3 938.9 1219.5 PAT Margins 4.3 11.4 14.9 15.6
Gross Block - Fixed Assets 688.5 730.9 855.9 980.9 Inventory days 33.2 30.3 33.0 33.0
Accumulated Depreciation 133.8 174.4 221.5 275.4 Debtor days 10.6 26.1 15.0 15.0
Net Block 554.8 556.4 634.4 705.4 Creditor days 33.9 35.2 34.0 34.0
Capital WIP 28.9 48.3 40.0 40.0 Asset Turnover 1.7 1.7 1.7 1.9
Fixed Assets 583.7 604.7 674.4 745.4 Return Ratios (%)
Investments 0.0 0.0 30.0 60.0 RoE 11.2 24.1 26.9 27.0
Other non-Current Assets 31.4 77.1 78.6 80.2 RoCE 14.5 28.0 31.8 32.8
Inventory 106.3 102.2 129.6 170.1 RoIC 15.1 31.4 37.4 43.5
Debtors 33.8 87.9 58.9 77.3 Valuation Ratios (x)
Loans and Advances 8.8 8.2 8.2 8.2 P/E 76.5 27.1 17.9 13.0
Other Current Assets 15.2 53.8 54.9 56.0 EV / EBITDA 31.5 15.3 11.2 8.1
Cash 20.0 58.1 124.4 285.8 EV / Net Sales 3.4 3.2 2.6 1.9
Total Current Assets 184.2 310.2 376.0 597.5 Market Cap / Sales 3.3 3.1 2.7 2.0
Creditors 108.5 118.8 133.5 175.3 Price to Book Value 8.5 6.5 4.8 3.5
Provisions 0.7 3.1 3.2 3.3 Solvency Ratios
Other Current Liabilities 66.3 81.8 83.4 85.1 Debt / EBITDA 1.1 0.5 0.2 0.1
Total Current Liabilities 175.5 203.7 220.1 263.7 Debt / Equity 0.3 0.2 0.1 0.1
Net Current Assets 8.6 106.5 155.8 333.8 Current Ratio 0.9 1.2 1.1 1.2
Application of Funds 623.7 788.3 938.8 1,219.5 Source: Company, ICICI Direct Research
Source: Company, ICICI Direct Research

ICICI Securities | Retail Research 2

 Company Update | Globus Spirits ICICI Direct Research

RATING RATIONALE
ICICI Direct endeavors to provide objective opinions and recommendations. ICICI Direct assigns ratings to its
stocks according -to their notional target price vs. current market price and then categorizes them as Buy, Hold,
Reduce and Sell. The performance horizon is two years unless specified and the notional target price is defined
as the analysts' valuation for a stock

Buy: >15%
Hold: -5% to 15%;
Reduce: -15% to -5%;
Sell: <-15%

Pankaj Pandey Head – Research [email protected]

ICICI Direct Research Desk,

ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No 7, MIDC,
Andheri (East)
Mumbai – 400 093
[email protected]

ICICI Securities | Retail Research 3

 Company Update | Globus Spirits ICICI Direct Research

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