Sula Vineyards jumps 11% after strong March quarter business update

Analysts believe that the wine producer is well placed to leverage global consumer shift towards low-alcohol beverage segment - beer and wine

Shares of Sula Vineyards soared 11 per cent to Rs 389.75 in Wednesday’s opening trade, after the company said that it witnessed 15 per cent year-on-year (YoY) growth in the March quarter (Q4FY23) for its own brands. Wine tourism, meanwhile, grew 18 per cent YoY in Q4FY23, with a 30 per cent jump in FY23 over FY22.

On the National Stock Exchange (NSE), the stock rallied 7 per cent to Rs 377.10 in intra-day trade. It had hit a 52-week high of Rs 432 on January 23, 2023.

Sula Vineyards is India’s largest and only listed wine producer with over 60 per cent share in the Elite & Premium1 wine business.

The company's own brands sales volumes crossed 1 million cases, with Elite & Premium wines surging past the 5 lakh case-mark for the first time. The company recorded its highest ever annual revenues both for its own brands as well as the wine tourism business.

On a provisional basis, Sula Vineyards said its net revenue for the Q4FY23 was at Rs 104.3 crore from its own brands and Rs 12.4 crore from wine tourism, which represents room revenue, sale of food & beverages, merchandise, and all other ancillary services.

The company’s wine tourism business continues to soar as total revenues touched Rs 80 crore in FY23, as against Rs 44 crore in FY19. Going ahead, the management expects this to be Rs 100 crore business in the coming year.

"The tribe of Indian wine drinkers is clearly growing - they are reaching for more premium wines and increasingly those are Sula’s brands," the management said.

Meanwhile, last month brokerage firm CLSA initiated coverage on Sula Vineyards with ‘Buy’ rating on the stock, and target price of Rs 475 per share.

According to analysts at CLSA, Sula is well placed to leverage global consumers shift to low-alcohol beverage segment - beer and wine.

"With strong backend capabilities and a pan-Indian distribution network, Sula is India’s market leader in wines with a >52 per cent market share in the 100 per cent grape wine category. The company's healthy Ebitda margin (>29 per cent in 9mFY23), gives Sula the ability to invest in category development which would be key for long-term growth," the brokerage firm added.

The brokerage firm expects the company to clock 17.5 per cent revenue CAGR and an 18.6 per cent EPS CAGR over the next two years. However, they anticipate Ebitda margins to moderate to 27.3 per cent by FY25CL, as the company focusses on category development.

The company had raised Rs 960 crore through initial public offering (IPO) by issuing shares at price of Rs 357 per share. It made its stock market debut on December 22, 2022. Post debut, the stock hit a low of Rs 305.35 on December 26, 2022.