Globus Spirits hits record high in a weak market; surges 67% in 1 month

In Q1FY21, the company's Ebitda margin grew by 785 basis points YoY to 18.0 per cent on account of higher ENA realisations and softening raw material and fuel prices

Shares Globus Spirits were locked in the 5 per cent upper circuit band at Rs 224.80 -- also its fresh record high -- on the BSE on Wednesday on expectation of strong earnings going forward.

The stock of the breweries and distilleries has outperformed the market by surging 67 per cent, as compared to 0.29 per cent rise in the S&P BSE Sensex in the past month. In the past three months, it has zoomed 111 per cent, as against 12.4 per cent gain in the benchmark index. Till 02:05 pm, a combined 682,752 equity shares had changed hands and there were pending buy orders for 56,602 shares on the NSE and BSE till the time of writing of this report.

Globus Spirits reported strong April-June quarter (Q1FY21) results owing to continued improvement in margin profile in spite of weaker operating leverage. Although, revenues fell 22 per cent year on year (YoY) to Rs 230 crore, Ebitda (earnings before interest, taxes, depreciation, and amortization) margin grew by 785 basis points YoY to 18.0 per cent in Q1FY21, on account of higher extra neutral alcohol (ENA) realisations and softening raw material and fuel prices.

Strong demand of bulk alcohol in domestic as well as export markets, rise in country liquor consumption combined with the increase in demand for hand sanitizers, along with a strong portfolio of IMFL brands will be the pillars to build the next phase of growth for the Company, the management believes.

Globus Spirits is one of the leading players in the Indian alcoholic beverages industry. It caters to four important segments of the alcohol industry - Indian Made Indian Liquor (IMIL), Indian Made Foreign Liquor (IMFL), IMFL bottling and bulk alcohol.

"Newer brands for IMIL (Goldee, IMIL brand with IMFL like 42.7 per cent alcohol concentration) and newer opportunities for ethanol utilisation would lead to greater usage of captive ENA. We expect margins to be rangebound at 14-15 per cent for FY21E, FY22E. Also, GSL is planning to lower debt, which should reduce interest cost and aid in improving profitability. Subsequently, FCF yield is expected to remain elevated," ICICI Securities said in Q1 results update.