Sula Vineyards Shares Rise 9%; Analysts Say May Deliver Up To 44% Returns; Details

Sula Vineyards Share Price: Shares of wine producer Sula Vineyards rallied nearly 9 per cent to Rs 371.2 in Wednesday’s intraday trade on BSE after the brokerage firm CLSA initiated coverage on the stock with a buy rating. The stock has surged over 12 per cent in two trading sessions.

Foreign broking firm CLSA has initiated coverage on Sula Vineyards with a target price of Rs 475, which indicates a 44 per cent upside from March 21 closing price. According to CLSA, Sula is well-placed to take advantage of the global consumer shift towards the low-alcohol beverage segment, which includes beer and wine.

CLSA notes that Sula has a strong backend capability and a pan-India distribution network, making it India’s market leader in wines with over 52 per cent market share.

“With a healthy EBITDA margin of over 29 per cent, the company has the ability to invest in category development, which is crucial for long-term growth,” it said.

It has also forecast a compounded earnings per share growth of 18.6 per cent for Sula over the next two years.

The size of India’s wine market remains minuscule when compared to that of spirits. The entire alco-beverage consumption market in India stands at 987 million cases. Of this, 30 per cent is beer, 69.3 per cent is spirits, and only 0.7 percent is wine.

By market size, India is the third-largest alcoholic beverage market in the world at around Rs 2.5 lakh crore as of FY20.

“Sula’s focus on growing its own high-margin premium brand has helped it increase Ebitda margin to > 29 per cent in 9MFY23 vs 25 per cent in FY22; We expect a 17.5 per cent revenue Cagr and an 18.6 per cent EPS Cagr over the next two years, but Ebitda margins should moderate to 27.3 per cent by FY25CL as the company focuses on category development,” CLSA said.

“Change in wine incentives schemes remains a key regulatory risk. We value Sula at 34x FY25 EPS (15 per cent discount to the average of other alcohol beverage companies) and initiate with a PT of Rs 475,” it added.

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