25 July 2016
Update | Sector: Others
TP: INR850 (+19%)
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Product launches, capacity expansion to support growth
Aggressive capacity addition:
Manpasand Beverages’ (MANB) current capacity
of 125,000 cases/day (cpd) is targeted to increase to ~250,000 cpd by FY18
(including the 50,000 cpd-Ambala facility that is expected to be commissioned
in August 2016), as against our initial expectation of 225,000 cpd. Total capex
planned is in the range of INR3.5-4b over the next two years, which has the
potential to generate revenues of 2x. The Mango SIP brand is available in 24
states across India, with none of the states contributing more than 7-8% of
total revenues. The key states include UP, Gujarat, Punjab, Haryana and Orissa
– with additional capacities getting commissioned, the company will look at
exploring opportunities in new states.
Fruits Up to go pan-India, supported by increased capacity and advertisement
With the Ambala facility planned to go on stream, capacity for its
Fruits Up carbonates version is expected to increase from 17,500cpd to 42,500
cpd, while that for juice drinks (Mango SIP and Fruits Up non-carbonates) is
likely to increase from 107,500cpd to 135,000cpd. Currently, Fruits Up is sold in
Gujarat, Maharashtra, Delhi and Orissa, and the company has plans to launch
them pan-India. MANB will launch its aggressive advertisement campaign in
August 2016 to educate consumers about factors that differentiate its Fruits Up
brand from other cola drinks. We expect Fruits Up to register revenue CAGR of
100% over FY16-18E, contributing 34% of total revenues in FY18.
Margin improvement to be ploughed back into business:
registered EBITDA margin of 19.8% in FY16, which is expected to rise further as
contribution of Fruits Up increases. However, the company plans to plough
back incremental margins into its business via increased advertisement spends
and schemes (currently 3-4% of revenue). Any gains from reduction in raw
material prices will also be ploughed back into the business.
New products in pipeline to aid growth:
MANB recently launched ‘Coco SIP’
packaged coconut water and plans to grow this business over the next two
years, with North India (where fresh coconut water is not available much) as its
main target market. The company, which operates on an outsourced
manufacturing model, is expected to register revenues of INR500m in FY18.
The other new product in pipeline is packaged sugarcane juice (first trial
completed). The company plans to launch this first-of-its-kind packaged
hygienic sugarcane juice product around 1QFY18.
Monetizing mineral water business:
India’s INR121b bottled water market is
growing at 18-20% annually. The company’s packaged drinking water brand
‘Pure SIP’ is offered free of cost on a promotional basis to customers along with
its Mango SIP or Fruits Up products. To benefit from increasing prices of
packaged drinking water (INR15/liter v/s INR12 last year), the company plans
to start monetizing its water business by the end of this year and has thus
expanded its senior management team.
Equity Shares (m)
M.Cap.(INR b)/(USD b)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR m)
Free float (%)
35.8 / 0.5
743 / 349
Financials & Valuation (INR b)
2016 2017E 2018E
EPS Gr. (%)
120.2 135.6 161.1
(Niket.Shah@MotilalOswal.com); +91 22 6129 1535
Investors are advised to refer through important disclosures made at the last page of the Research Report.
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