A ADD
(no change)

Som Distilleries & Breweries Ltd

Company Flash Note Brewers Jul 10, 2023
InCred Research / Consensus 0.0
CMP* ₹295
Target Price ₹369
* price as on January 01, 0001
Financials
India
Jul 10, 2023 - 10:55 AM

Consensus ratings*: Buy 1 Hold 0 Sell 0
Previous target: 369
Up/downside: 25.1%
Reuters
Bloomberg: SDB IN
Market cap: US$314m
Rs22,792m
Average daily turnover: US$1.7m
Current shares o/s: 77.3m
Free float: 66.9%
*Source: Bloomberg

Key financial forecast

Mar-24F Mar-25F Mar-26F
Net Profit (Rsm) 702 949 1,191
Core EPS (Rs) 9.29 12.29 16.81
Core EPS Growth 10.8% 32.2% 36.8%
FD Core P/E 31.74 24.01 17.55
Recurring ROE 17.2% 19.7% 20.6%
P/BV (x) 5.18 4.34 3.00
DPS (Rs) 0.91 1.23
Dividend Yield 0.31% 0.42% 0.63%
*Source: Bloomberg

Price performance
1M 3M 12M
Absolute (%) 17.7 87.1 340.7
Relative (%) 12.9 71.5 267.8
Major shareholders
% held
Promoter & Promoter Group 33.1
0.0
0.0
Analyst(s)

Nitin AWASTHI

T (91) 22 4161 1550
E nitin.awasthi@incredcapital.com

Raises fresh capital to increase footprint

The board of directors of SDBL has approved the issue of 51,50,000 convertible equity warrants & 2,50,000 equity shares on a preferential basis.

The total inflow post issue and conversion of warrants will amount to Rs1,485m, with the promoter stake rising to 38% from ~34.5% currently.

We have an ADD rating on the stock, valuing it at 30x FY25F EPS to arrive at our target price of Rs369.

Fund-raising via issue of shares and warrants @ Rs275 each

Som Distilleries and Breweries or SDBL’s board has approved the issue of 51,50,000 convertible warrants to promoters and other investors on a preferential basis.

The board has also approved the issue of 250,000 equity shares to other investors.

The issue of convertible warrants and equity shares is subject to securing several approvals, starting with its existing shareholders at the extraordinary general meeting.

The total fund inflow into the company post share issue and conversion of warrants will amount to Rs1,485m.

The objectives of the issue are1) payment of certain loans, 2) part-finance the capex planned at Bhopal and Hassan units, 3) meet working capital requirements, and 4) expansion into new markets and products.

Finer details about the issue

The promoter held a 34.3% stake in SDBL as of 31 Mar 2023, and in recent quarters the promoter’s buying spree continued. This resulted in the promoter holding ~34.5% stake at the end of 1QFY24.

The promoter’s stake in SDBL post conversion of the warrants would be ~38%.

Continuous share purchases by the promoter reflect confidence in the business.

SDBL stated the proceeds of the issue are to meet capex needs of Bhopal and Hassan.

It is important to note that SDBL doubled its Hassan plant’s output at the start of 1QFY24 and the need for further expansion indicates that SDBL has hit full capacity so soon.

The market share stated by the company of 21% in Karnataka points out complete capacity utilization and the need for further expansion in a span of just one quarter. 

Our view

The equity dilution will be to the extent of ~7%, which normally leads to EPS dilution as well but if SDBL is indeed in that kind of capacity utilization and sales spree, we feel it can achieve FY25F numbers in FY24F itself.

We have not delved into the intricacies of equity dilution as 1QFY24 results are round the corner and the changes, if any, will be incorporated in our report post results.

We have an ADD rating on SDBL, valuing the stock at 30x FY25F EPS to arrive at our target price of Rs369.

We expect good results from SDBL in the coming quarters and the recent news flow fortifies our high conviction on the stock.

Figure 1: Beer manufacturing capacity of SDBL
SOURCE: BLOOMBERG

BY THE NUMBERS

Profit & Loss
(Rs mn) Mar-23A Mar-24F Mar-25F Mar-26F
Total Net Revenues 8,067 10,870 13,062 15,665
Gross Profit 3,214 4,565 5,551 6,658
Operating EBITDA 1,021 1,359 1,698 2,036
Depreciation And Amortisation (170) (195) (215) (243)
Operating EBIT 851 1,164 1,483 1,793
Financial Income/(Expense) (146) (209) (191) (173)
Pretax Income/(Loss) from Assoc.
Non-Operating Income/(Expense)
Profit Before Tax (pre-EI) 704 955 1,292 1,620
Exceptional Items
Pre-tax Profit 704 955 1,292 1,620
Taxation (101) (253) (342) (429)
Exceptional Income - post-tax
Profit After Tax 603 702 949 1,191
Minority Interests
Preferred Dividends
FX Gain/(Loss) - post tax
Other Adjustments - post-tax
Net Profit 603 702 949 1,191
Recurring Net Profit 603 702 949 1,191
Fully Diluted Recurring Net Profit 603 702 949 1,191
Balance Sheet
(Rs mn) Mar-23A Mar-24F Mar-25F Mar-26F
Total Cash And Equivalents 126 775 1,092 41
Total Debtors 1,421 1,915 2,302 2,760
Inventories 1,353 1,823 2,190 2,627
Total Other Current Assets 994 326 261 313
Total Current Assets 3,895 4,840 5,846 5,741
Fixed Assets 3,911 4,788 4,672 5,929
Total Investments
Intangible Assets
Total Other Non-Current Assets 1,313 326 392 470
Total Non-current Assets 5,224 5,114 5,064 6,399
Short-term Debt 825 725 625 525
Current Portion of Long-Term Debt 1 2
Total Creditors 2,340 2,723 3,023 3,379
Other Current Liabilities 481 481 481 481
Total Current Liabilities 3,647 3,930 4,130 4,387
Total Long-term Debt 1,597 1,497 1,397 1,297
Hybrid Debt - Debt Component
Total Other Non-Current Liabilities
Total Non-current Liabilities 1,597 1,497 1,397 1,297
Total Provisions 121 124 127 130
Total Liabilities 5,365 5,551 5,654 5,813
Shareholders Equity 3,754 4,403 5,257 6,329
Minority Interests
Total Equity 3,754 4,403 5,257 6,329
Cash Flow
(Rs mn) Mar-23A Mar-24F Mar-25F Mar-26F
EBITDA 1,021 1,359 1,698 2,036
Cash Flow from Invt. & Assoc.
Change In Working Capital (887) 90 (387) (589)
(Incr)/Decr in Total Provisions
Other Non-Cash (Income)/Expense
Other Operating Cashflow
Net Interest (Paid)/Received (146) (209) (191) (173)
Tax Paid (253) (342) (429)
Cashflow From Operations (12) 987 778 845
Capex (994) (100) (100) (1,500)
Disposals Of FAs/subsidiaries
Acq. Of Subsidiaries/investments
Other Investing Cashflow
Cash Flow From Investing (994) (100) (100) (1,500)
Debt Raised/(repaid) 642 (200) (200) (200)
Proceeds From Issue Of Shares 19 17
Shares Repurchased
Dividends Paid (70) (95) (119)
Preferred Dividends
Other Financing Cashflow (160) (209) (191) (173)
Cash Flow From Financing 502 (462) (486) (492)
Total Cash Generated (505) 425 192 (1,147)
Free Cashflow To Equity (364) 687 478 (855)
Free Cashflow To Firm (847) 1,096 869 (482)
Key Ratios
(Rs mn) Mar-23A Mar-24F Mar-25F Mar-26F
Revenue Growth 122.4% 34.8% 20.2% 19.9%
Operating EBITDA Growth 504.8% 33.1% 25.0% 19.9%
Operating EBITDA Margin 12.7% 12.5% 13.0% 13.0%
Net Cash Per Share (Rs) (31.12) (18.72) (12.04) (27.70)
BVPS (Rs) 50.89 56.99 68.05 98.30
Gross Interest Cover 5.33 5.57 7.76 10.37
Effective Tax Rate 14.4% 26.5% 26.5% 26.5%
Net Dividend Payout Ratio 7.3% 7.3% 7.3%
Accounts Receivables Days 58.36 56.02 58.92 58.97
Inventory Days 82.66 91.92 97.52 97.61
Accounts Payables Days 67.52 74.90 79.45 79.52
ROIC (%) 18.5% 18.9% 24.8% 28.4%
ROCE (%) 15.5% 17.9% 21.0% 22.9%
Return On Average Assets 10.6% 12.2% 14.2% 15.6%
Key Drivers
(Rs mn) Mar-23A Mar-24F Mar-25F Mar-26F
Outstanding Orderbook N/A N/A N/A N/A
Order Book Depletion N/A N/A N/A N/A
(Please link your key drivers and assumptions from EFA Sheet here) - Delete this line once done N/A N/A N/A N/A

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