Manpasand Bev erages
BSE SENSEX
27,860
S&P CNX
8,592
11 August 2016
1QFY17 Results Update | Sector: Others
CMP: INR678
TP: INR850 (+25%)
Buy
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Bloomberg
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 (%)
MANB IN
50.1
34.0/ 0.5
743 / 369
7/41/62
40
49.6
Financials & Valuations (INR b)
Y/E Mar
2016 2017E 2018E
Sales
5.6
8.5
13.0
EBITDA
1.1
1.7
2.6
NP
0.5
0.9
1.4
EPS (INR)
10.1
17.1
28.3
EPS Gr. (%)
26.7
69.1
65.8
BV/Sh. (INR)
120.2 135.6 161.1
RoE (%)
11.4
11.9
17.0
RoCE (%)
12.2
13.4
19.1
P/E (x)
67.1
39.7
23.9
P/BV (x)
5.6
5.0
4.2
Estimate change
TP change
Rating change
Stellar growth, focus on branding through advertisements
Revenue in line, but EBITDA margins below estimates:
Manpasand Beverages’
(MANB) 1QFY17 revenues grew a stellar 58% YoY to INR2,293m (est. of
INR2,246m) (revenue net of excise duty). Revenue of Mango SIP grew 47% YoY,
while that of Fruits Up grew a robust 120% YoY. Revenue mix for Mango SIP,
Fruits Up and others (incl. ORS and Coco SIP) stood at 77:22:1 v/s 84:16:0 in
1QFY16. Revenues also included contribution of ~INR120m from Modern
Trade, which was absent in the base quarter. EBITDA margin declined 360bp to
19.7% from 23.3% in 1QFY16 due to higher other expenses. EBITDA grew 33.5%
YoY to INR453m. However, due to lower interest expense (INR1m v/s INR41m
in 1QFY16) and higher other income (INR17m v/s INR1m in 1QFY16), adj. PAT
grew robustly by 82% YoY to INR286m (est. of INR271m) in 1QFY17.
Focus on branding and advertisement:
The company more than trebled
spending on advertisements (across TV commercials, radio, wall paintings and
billboards) to INR180m v/s INR50m in 1QFY16. As a result, other expenses (as
% of sales) increased 360bp to 15.1%, which led to EBITDA margin decline of
360bp to 19.7%. The company aims to follow up with another round of
aggressive adspend in 4QFY17.
Coco SIP soft launched in few markets:
MANB soft launched Coco SIP in
Mumbai and some parts of Gujarat in 1QFY17, which was well received by
consumers. However, the company has taken cognizance of some complaints
that the taste of the product differed from across batches due to the usage of
naturally processed coconut water. In this view, MANB is reworking on bringing
uniformity in taste across batches.
Valuation and view:
We believe MANB is on the cusp of a high-growth cycle
due to its capacity expansion, new product launches and increase in
distribution network, which should lead to market share gains from 5% in 2016
to 7.5% in 2018. The launch of Fruits Up and Coco SIP brands is expected to
help tackle seasonality issue and ramp up capacity utilization, thereby driving
margins. We expect sales and PAT CAGR of 53% and 67%, respectively, over
FY16-18E. The stock trades at a P/E of 40x/24x FY17/18E EPS. At a P/E of 30x
FY18 EPS, we value the stock at a target price of INR850 (25% upside) and
maintain our
Buy
rating.
Niket Shah
(Niket.Shah@MotilalOswal.com); +91 22 6129 1535
Chintan Modi
(Chintan.Modi@MotilalOswal.com); +912239825422
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.