GM Breweries Q2 Report: Stock Falls 3% Following Year-on-Year Sales Decline and Shrinking Profit Margins
Prepared On: October 10, 2024
Company Overview:
G M Breweries Ltd. is a significant player in the consumer non-durables sector, specializing in the production and sale of alcoholic beverages. Founded on December 9, 1981, by CEO Jimmy William Almeida, the company is based in Mumbai, India. G M Breweries focuses on manufacturing country liquor (CL) and Indian Made Foreign Liquor (IMFL) under brand names like G.M. Santra, G.M. Doctor, G.M. Limbu Punch, and G.M. Dilbahar Sounf. With a strong presence in Maharashtra, the company has established itself as the largest manufacturer of country liquor in the state.
Key Company Information:
- Market Capitalization: ₹19.64 Billion
- Dividend Yield (Indicated): 0.65%
- P/E Ratio (TTM): 12.55
- Net Income (FY): ₹1.52 Billion
- Revenue (FY): ₹6.15 Billion
- Employees: 363
- ISIN: INE075D01018
- Website: gmbreweries.com
Industry Outlook:
The alcoholic beverages industry in India is experiencing steady growth driven by factors like rising disposable incomes, changing consumer preferences, and urbanization. Market segments include beer, spirits (CL and IMFL), and wine, with spirits holding a significant market share.
Key Industry Trends:
- Regulatory Environment: Stringent regulations on licensing, taxation, and advertising impact industry profitability.
- Consumer Preferences: Shift towards premium and branded products, with a focus on quality and brand reputation.
- Distribution Channels: Expansion of organized retail and e-commerce enhancing consumer accessibility.
- Health and Wellness: Rising health awareness driving demand for healthier beverage options.
- Market Growth: Indian alcoholic beverages market is expected to grow at a CAGR of around 10% in the next five years.
Business Segments
G M Breweries operates in key segments focusing on country liquor, IMFL, and exploring opportunities in non-alcoholic beverages to diversify its product portfolio.
- Country Liquor (CL): Leading presence in Maharashtra with brands like G.M. Santra and G.M. Doctor.
- Indian Made Foreign Liquor (IMFL): Catering to middle to high-income consumers with a variety of spirits.
- Other Segments: Focus on non-alcoholic beverages for product diversification.
Earnings Report
Q1 FY25:
- Revenue from Operations: ₹152.3 crore
- Net Profit: ₹31.5 crore
- Profit Before Tax (PBT): ₹29.8 crore
Q2 FY25:
- Revenue from Operations: ₹149 crore
- Net Profit: Decreased by 13.11% quarter-on-quarter
- Profit Before Tax (PBT): ₹28.97 crore
Half-Year Performance:
- Net Profit: Increased by 10.24% to ₹46.61 crore in H1 FY25.
Financial Summary
- Revenue (FY 2023): ₹6.15 Billion
- Net Income (FY 2023): ₹1.52 Billion
- Market Capitalization: ₹19.64 Billion
- Dividend Yield (Indicated): 0.65%
- P/E Ratio (TTM): 12.55
Performance Overview:
- Revenue Trend: Stable with minor fluctuations, half-year revenue up by 1% year-on-year.
- Profitability: Net profit improved in H1 FY25 despite a decrease in Q2 FY25.
- Expense Management: Total expenses slightly increased, and raw material costs declined.
- Cash Flow: Operating cash flow has declined over the past three years.
Debt and Coverage:
- Debt managed effectively with a steady increase.
- Careful monitoring of free cash flow and coverage ratios is needed for financial stability.
Stock Performance Insights:
- Appreciation of 41.98% YTD, absolute 1-year return of 39.67%.
- Shareholding pattern indicating ownership distribution among promoters, institutional investors, and public shareholders.
SWOT Analysis:
- Strengths: Market leadership, diverse product portfolio, robust financials, consistent dividend growth.
- Weaknesses: Decline in PAT, cash flow issues, market dependence.
- Opportunities: Market expansion, product diversification, digital growth, partnerships.
- Threats: Regulatory risks, competition, economic factors, health trends.
Conclusion:
G M Breweries Ltd. showcases strength and market positioning in Maharashtra’s alcoholic beverages industry. Despite challenges in Q2 FY25, the company reported stable revenue and improved profits in H1 FY25—an attractive investment option with strengths and areas of concern for investor consideration.