Fundamental Analysis of Som Distilleries and Breweries
Fundamental Analysis of Som Distilleries and Breweries: As more men and women reach drinking age, incomes increase, and the population grows, the growth rate remains constant. Alcobev is changing the dynamics of the industry as raising awareness, personal choice, urbanization and building a culture of inviting guests to have drinks at gatherings are expected to gain traction.
One of the factors driving interest in alcohol is the increase in young and working-age populations, as well as work pressures and self-satisfaction with achievement. In this article, you will learn about the fundamental analysis of Som Distilleries & Breweries operating in the Alcobev industry.
Fundamental Analysis of Som Distilleries & Breweries – Company Overview
like a brewery It is an India-based company founded in 1993 by JK Arora, part of SOM Group. They specialize in brewing, bottling, canning and blending of alcoholic beverages, including beer and Indian Foreign Liquor (IMFL). We are building a sales and distribution network in India and exporting our products to various regions around the world, including Africa, the Americas, Asia, and the Middle East.
Their product portfolio includes a variety of alcoholic beverages such as beer, rum, brandy, vodka, and whiskey. Key brands include Hunter Beer, Woodpecker Beer and Black Fort, as well as other brands such as Legend, Genius, Sunny, Gypsy and Blue Chip. The company generates significant revenue from beer sales.
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Segment Analysis:
The Company’s operating revenues are derived from the manufacture and sale of alcoholic beverages, which constitute a single segment. They have a significant market share in states like Madhya Pradesh and Karnataka. Recently, the company has been able to increase its market share in Karnataka and register sales growth of around 51% year-to-date.
Fundamental Analysis of Som Distilleries and Breweries – Industry Analysis
The Indian alcoholic beverage (alcobev) industry has grown significantly in recent years, becoming one of the fastest growing beverage markets globally. It also ranks as the third largest alcoholic beverage market globally.
This rapid expansion is driven by a variety of factors, including increasing urbanization, rising disposable income, changing consumer choices, and changing expectations of young people. India’s high population growth rate is also contributing to the increase in alcohol consumption, with the number of adults of drinking age increasing every year.
Despite facing challenges such as lockdowns and tax hikes due to the pandemic over the past two years, the industry has adapted by modifying distribution channels to comply with restrictions and introducing new product mixes to meet changing consumer demands. This adaptability has allowed the industry to recover and experience a surge in sales following the pandemic.
According to IMARC Group, the Indian beer market size reached INR 414.7 billion in 2023 and is expected to grow at a compound annual growth rate (CAGR) of 7.1% from 2024 to 2032 to reach INR 781.2 billion by 2032.
Some of the key drivers driving the market include changing preference of consumers, especially millennials, for alcoholic beverages during social and cultural gatherings and celebrations, ease of product availability through online platforms, and changing consumer lifestyles.
The industry has also seen increased demand for premium and premium alcoholic beverages due to the growing middle class with increasing disposable income. urbanization, the desire for a sophisticated drinking experience. Maharashtra, Karnataka, Telangana, Odisha, West Bengal, Delhi, Haryana and Punjab are among the major alcohol consumers in India.
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Fundamental Analysis of Som Distilleries & Breweries – Financials
Revenue and Net Profit:
Operating revenue reached 140 million won. 1,498.05 crore in FY23 compared to Rs. In fiscal year 22, it is $656.21 billion. Net profit recorded 160 million won. It improved from a deficit of 603 billion won. Last year, it was 984 million won.
Som’s revenue has been trending upward since FY21, with growth more than doubling from FY22. Sales stagnated from 2019 to 22. 691.37 crore in FY23 as compared to excise duty of Rs. 291.05 crore.
Excise duty as a percentage of revenue increased from 44.51% in FY23 to 46.15%. Net profit has increased exponentially since 2022. Net profit has fluctuated over the past five years, but has improved significantly in FY23.
profit:
Som’s OPM increased from 0.77% in FY22 to 10.71% in FY23. FY23 NPM was 7.47%, recovering from -2.71% in FY22. Operating margins have increased significantly from thin margins in FY22. Employee costs declined relative to revenue in FY23. However, material costs increased in FY23 compared to the previous year.
Overall, OPM achieved sustainable margins. Net profit margin has also improved since 2019. Margins have remained volatile over five years. Other income in 2023 increased compared to the previous year.
Yield:
RoE improved to 16.06% in FY23 from -3.39% in FY22. RoCE in FY23 increased from 0.69% in FY22 to 14.53%. The increase in returns in FY23 was driven by an increase in net profit. Over a five-year period, returns fluctuated and RoCE followed the same trend as RoE.
The increase in profits improved the company’s return on additional capital in FY23. RoCE in FY22 was positive due to profitability. operating profit Since it is at a level, the rate of return becomes slim.
Debt Analysis:
The company’s D/E was 0.65x compared to 0.68x in FY22. The interest coverage ratio in FY23 increased from 1.28x in FY22 to 6.48x. The company’s debt-to-equity ratio improved compared to the previous year. However, the ratio is stable. However, lowering debt over the next few years could help the company deleverage.
The company said it would take out loans to finance growth. Interest coverage improved compared to the previous year due to improved profits. Over a five-year period, this ratio has been highly volatile and, depending on the industry in which the company operates, anything above three times is considered safe.
Now we have taken a closer look at Som Distilleries & Breweries’ complete financial information for fundamental analysis.
Fundamental Analysis of Som Distilleries and Breweries – Peer Comparison
Here are some peers for comparison through ratios:
Fundamental Analysis of Som Distilleries and Breweries – Key Indicators
Let’s take a look at some of Som Distilleries & Breweries’ key indicators.
Fundamental Analysis of Som Distilleries & Breweries – What’s Next?
- Capacity expansion to meet orders from beer facility in Hassan, Karnataka. The facility has the capacity to add 6 million cases and is expected to be operational by April 2024.
- To diversify and strengthen its market presence, it has entered into a strategic contract manufacturing agreement in Jammu and Kashmir for the production of IMFL.
- We plan to build our own production capacity or contract manufacturing for the Rajasthan and Jharkhand markets by August or September 2024.
- Expansion of production capacity in Bhopal to set up a new packaging line with an estimated investment of Rs. 500 million.
- Somssi’s goal is to make the Woodpecker brand a millionaire brand within the next two to three years.
- Som will borrow more money over the next 6-12 months to fund growth with an expected annual incremental working capital requirement of around Rs. 2 billion to 2.5 billion.
These were some of the future plans listed for the company under the topic of fundamental analysis of Som Distilleries & Breweries.
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conclusion
Now that we’ve come to the end of this article, let’s take a quick look at the fundamental analysis of Som Distilleries & Breweries. The company’s performance has improved. Sales and net profit have improved in recent years. But the company has thin margins and risks rising excise taxes. Price restrictions on alcohol products may result in increased pressure on margins due to inflationary pressures.
The government should also consider increasing tariffs. As domestic demand for alcoholic beverages increases, the company may grow based on its brand value based on quality and promotion. What do you think about the company’s potential? Let us know in the comments section below.
Written by Santosh
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