INVESTMENT RESEARCH

FUNDAMENTAL COVERAGE- GM BREWERIES LTD.

th
Dated : 18 Oct. 2016
BUY Investment Rationale
Price ` 560 GM BREWERIES LTD, Aims to provide the finest quality country liquor to the common man, who
Fair Value 707 savours its taste, at the lowest possible price. The company is growing steadily and has earned a
Upside 26% dedicated customer base.
Div Yield 0.4% Company is having a state of the art fully automatic Bottling Plant at Virar, District Thane, in the
Tenure 1 Year state of Maharashtra with a capacity to produce about 50,000 cases a day, which initially stood at
Sensex 28050.88 producing 200 cases a day.
Nifty 8677.90
Group/Index B GMBL is the largest manufacturer of country liquor in the state of Maharashtra with a
sizeable market share.

The country liquor industry producers were producing only 750 & 375 ml bottles in the old days but it
was GMBL who introduced 180 ml bottles in the country liquor industry. Further, company is pioneer in
Stock Details introducing pet bottles to the country liquor industry.
M.cap (` in cr) 819
Equity (` In cr) 14.62 Financial Overview
52 wk H/L ` 928.20/440.850
Face Value ` 10 The financial performance during the year under reference has been highly impressive in terms of sales
NSE code GMBREW and profitability which was mainly due to moderate price levels of raw materials and packing materials
BSE code 507488 throughout the year and better realizations for the company’s products.

Q1 & Q2 FY 2016-17 Standalone Results

Key Valuation Ratios Q2 Results  The company posted a Net Profit of ` 11.12 crores for the September Quarter, 2016 as
RONW 27% compared to ` 9.43 crores for the previous quarter last year. However, Total Revenue of the company
P/E 15.05 declined from ` 93.78 crores to ` 87.69 crores for the quarter, on Y-O-Y basis. EBITDA for the quarter
P/BV 4.0 stood at ` 17.11 Crores as against ` 18.11 Crores during the previous quarter last year, delivering
EV/EBIDTA 9.00 EBITDA Margins at 19.51% against 19.31% respectively. EPS for the quarter is at ` 7.6.

IN ` Q1 Results  The company posted a Net Profit of ` 12.58 crores for the June Quarter, 2016 as compared
Key Financial Data to ` 15.89 crores for the previous quarter last year. However, Total Revenue of the company increased
EV (`in cr) 822.95 from ` 81.22 crores to ` 89.05 crores for the quarter, an increase of 9.6% on Y-O-Y basis. EBITDA for
BV (`in cr) 140.01 the quarter stood at ` 19.90 Crores as against ` 21.37 Crores during the previous quarter last year. EPS
NW(`in cr) 204.69 for the quarter is at ` 8.61.
Adj. EPS (TTM) 37.20
Standalone Results
% change % change
Particulars Quar. Ended Quarter Ended Quarter Ended
Q-0-Q Y-0-Y
Share Holding Pattern 30.09.2016 30.06.2016 30.09.2015
Total Income 87.69 89.05 93.78 -1.53% -6.49%
Promoter public EBITDA 17.11 19.90 18.11 -14.02% -5.52%
25.5 EBITDA % 19.51% 22.35% 19.31% - -
7% PBT 17.01 19.24 16.10 -11.59% 5.65%
PBT% 19.40% 21.61% 17.17% - -
74.4
3% PAT 11.12 12.58 9.43 -11.61% 17.92%
PAT % 12.68% 14.13% 10.06% - -
EPS 7.6 8.61 8.06 -11.73% -5.71%

VALUATION (` In Cr except per share)

FY 18Est. Earnings 64.39
Equity Share Capital 14.62
FV 10
No. of Equity Shares 1.46
EPS Est. (FY2017) 44.04
Estimated P/E Ratio 18
Fair Value(Dis.@12%) 707

Corporate Governance Transparency Ratio's

Year End 201603 201503 201403 201303
Tax Rate % 33.58 34.54 34.13 39.03
Receivable days 16 17 8 -
Source: Google Div. Payout % 5.22 15.71 10.88 18.31

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FY 2015-16 Performance

The company has completed a very successful FY 2015-16 in which it has posted the highest ever net profit after tax
of ` 58.31 crores. The reserves of the company have reached to ` 169.28 Crores during the year.
Gross revenues increased to ` 1,258.04 Crores, a growth of around 21.48 % against ` 1,035.56 Crores in the previous
year. Profit before depreciation, exceptional item and taxation was ` 89.84 Crores against ` 34.02 Crores in the
previous year. After providing for depreciation and taxation of ` 5.41 Crores & ` 29.48 Crores respectively, and
adding exceptional item of ` 3.36 Crores the net profit of the Company for the year under review was placed at `
56.08 Crores as against ` 18.63 Crores in the previous year.
Due to favorable market conditions and on account of better realization rates company’s turnover in terms of
value has increased at an impressive 21 % during the year under review. The profit after tax during the year
under review had increased by a record 212.93 % due to moderate levels of Raw Material/Packing Materials
prices throughout the year and also due to better realization value for the company’s products.

Cash and cash equivalents as at March 31, 2016 was ` 34.05 Crores. The company continues to focus on
judicious management of its working capital, Receivables, inventories and other working capital parameters.

G.M.SANTRA Company's Brands

The most leading and Prestigious blend, made from Premium distilled Molasses based Rectified Spirit of
Multi Pressure Vacuum Distillation Plant.
It is Blended with the best Orange flavors & is Widely preferred by the consumers for its organoleptic
taste and aroma.
Ruling at No. 1 Position amongst Country Liquor Industry for the past 12 years, in the State of
Maharashtra .
Finely filtered through 0.4 micron Resin Bonded Cellulose Cartridge Filtration system, to provide crystal
clear Brand. Its Foreign Liquors is Envy, Country Liquors Pride Blend.
G.M.DOCTOR One of company's Prestigious brand made from finely Distilled Vacuum distillation Plant. Balanced
Blend with the toss of sugarcane juice spirit flavor. Highly bodied palate and taste.

Ruling the market for the last 25 years.

Reputed Blend in all over Maharashtra State. Crystal clear filtration through 0.4 micron RBC cartridge
filtration.

A mixed punch blend of Lemon and lime flavors, along with the most supervised quality of Rectified
Spirit from MPVD plant. Again a toss of sweetness and sour taste maintained with the whiff of Indian
G.M.LIMBU PUNCH Spices and Herbs flavors.
It’s a cocktail made available to the consumers of foreign liquors. Transparent filtration through 0.4
micron RBC cartridge filter.

Superior blend of Extract fine Distilled Rectified Spirit and Anise flavor , added all spices flavors and herbs
flavor for additional palate.

A balanced blend of smoothness and mouth freshness, Tastes sweet , 0.4 micron RBC cartridge filter is
used for filtration media to fine crystal clear blend.

G.M.DILBAHAR SOUNF Company Overview

G.M.Breweries Limited (GMBL) is engaged in the manufacture of alcoholic liquor. Though the company
has got the facility to blend and bottle both Indian made foreign liquor and country liquor, the
concentration has been mainly on country liquor during this year also due to competitive market
conditions in the IMFL segment. The Company has been making impressive progress in the business of
country liquor during the past five years.

Keeping in view, the finest quality of products that the company offers, The GM SANTRA brand which is Ruling at
No. 1 Position amongst Country Liquor Industry for the past 12 years, in the State of Maharashtra, we have
VALUATION estimated the share price of the company as per P/E valuation, considering P/E at 18x on FY 18E EPS at ` 44
CONCLUSION (Discounted @ 12% for a year) , the Fair value of the share for next 1 year tenure turns around to be ` 707.
Therefore, we recommend to BUY this script.

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Quarterly Results (` in cr except per share)

Particulars LTM 201609 201606 201603 201512
Net Sales 361.30 87.67 89.03 91.70 92.87
EBITDA 91.40 18.37 20.66 27.65 24.69
Depreciation 5.30 1.35 1.35 1.24 1.39
Op Income 86.00 17.02 19.31 26.41 23.30
Misc.Inc (Exp.) 8.00 1.26 0.76 5.12 0.87
Interest Exp 0.70 0.01 0.07 0.11 0.52
EBT 85.30 17.01 19.24 26.30 22.78
Taxes 28.60 5.89 6.66 8.88 7.21
Net Inc(Reg) 56.70 11.12 12.58 17.42 15.57
Extraord. Items 2.20 0.00 0.00 2.23 0.00
Rep Net Inc 54.50 11.12 12.58 15.19 15.57
EPS 44.40 7.61 8.60 14.88 13.30
Adjusted EPS 37.20 7.60 8.60 10.40 10.60

Income Statement and Estimates ( ` in Cr except per share)

Particulars 201303 201403 201503 201603 2017E 2018E 2019E
Sales 287.76 288.64 307.34 359.57 379.21 401.21 446.23
Other operating Inc. 0.09 0.09 0.09 0.09 0.09 0.09 0.09
Total Inc. from operations 287.85 288.73 307.43 359.66 379.30 401.30 446.32
Operating EBITA 22.12 34.93 29.76 80.42 84.87 89.44 100.05

Profit & Loss

Total Inc. from operations 287.85 288.73 307.43 359.66 379.30 401.30 446.32
TOTAL EXPENDITURE 261.65 249.22 272.11 273.83 288.38 305.19 338.89
EBITDA 26.20 39.51 35.32 85.83 90.92 96.11 107.43
Depreciation (4.08) (4.58) (5.56) (5.41) (6.04) (6.67) (7.38)
Rep.profit before othrinc., 22.12 34.93 29.76 80.42 84.87 89.44 100.05
Goodwill amortization - - - - - - -
Rep.profit before othrinc., 22.12 34.93 29.76 80.42 84.87 89.44 100.05
OTHER INCOME 1.32 0.47 2.27 9.42 9.78 9.62 10.87
Profit from ordinary act. Before
Fin.Cost ,TAX & Exp.Items
23.44 35.40 32.03 89.84 94.65 99.06 110.92

Net financials
Interest income - - - - - - -
Interest expenses (2.48) (2.76) (3.57) (2.05) (0.67) - -
Net Financial Items (2.48) (2.76) (3.57) (2.05) (0.67) - -
Reported Pre-tax profit 20.96 32.64 28.46 87.79 93.98 99.06 110.92
Reported Tax charge (8.18) (11.14) (9.83) (29.48) (32.89) (34.67) (38.82)
Reported Net profit 12.78 21.50 18.63 58.31 61.09 64.39 72.10
Minorities - - - - - - -
P/L OF ASSOCIATE CO. - - - - - - -
Reported Net profit after
12.78 21.50 18.63 58.31 61.09 64.39 72.10
min. Intt.
Extra Ordinary income - - - - - - -
Reported Net Income after
extra ordinary items
12.78 21.50 18.63 58.31 61.09 64.39 72.10

EPS and Dividend

Dividend Paid (2.34) (2.34) (2.93) (2.93) (3.66) (3.66) (3.66)
Retained earnings 10.44 19.16 15.70 53.15 57.43 60.73 68.44
Reported EPS 13.65 22.97 15.91 47.89 41.78 44.04 49.32
Adjusted Basic EPS 8.74 14.71 12.74 38.36 41.78 44.04 49.32
DPS 2.50 2.50 2.50 2.50 2.50 2.50 2.50

Number Of Shares
Opening Balance 9.36 9.36 9.36 11.71 11.71 14.62 14.62
Issued during the Year - - 2.35 - 2.91 - -
Closing Balance 9.36 9.36 11.71 11.71 14.62 14.62 14.62
FV 10 10 10 10 10 10 10
Wtd. Avg. no. of shares 0.936 0.936 1.171 1.171 1.462 1.462 1.462
Note:- The figures shown in the brackets means NEGATIVE.

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BALANCE SHEET
Particulars 201303 201403 201503 201603 2017E 2018E 2019E
Equity & Liabilities
Shareholders' Fund
Share Capital 9.36 9.36 11.71 11.71 14.62 14.62 14.62
Reserves and Surplus 86.36 105.14 114.49 169.28 226.71 287.44 355.88
Minority Interests - - - - - - -
Total Shareholders' Fund 95.72 114.50 126.20 180.99 241.33 302.06 370.50
Non-Current Liabilities
Long-term Borrowings 5.42 23.17 19.17 - - - -
Other Long term Liab. - - - - - - -
Deferred Tax Liability 3.2 4.54 4.62 4.5 4.91 5.35 5.83
Long term Provisions - - - - - - -
Total Non-Current Liab. 8.62 27.71 23.79 4.50 4.91 5.35 5.83
Current Liabilities
Short term Borrowings 17.23 0.06 7.07 - - - -
Trade Payables 7.77 4.15 4.08 3.75 1.90 1.81 1.79
other current liability 26.59 47.14 41.15 38.28 34.14 29.29 25.44
Short term Provisions 27.78 27.03 3.52 3.52 3.52 3.87 4.26
Total current Liabilities 79.37 78.38 55.82 45.55 39.55 34.97 31.48
Total Equity & Liab. 183.71 220.59 205.81 231.04 285.79 342.38 407.81
Assets
Non-Current Assets
Fixed Assets
Tangible fixed Assets 127.65 102.30 86.70 80.76 89.89 99.27 109.74
Intangible FA - - - - - - -
Non-current Investments 0.02 48.97 76.75 88.18 110.23 137.78 172.23
Long term L&A 34.36 31.58 2.50 1.37 1.21 1.21 1.21
Other Non current Assets - - - - - - -
Deferred tax receiv. - - - - - - -
Total Non-Current Assets 162.03 182.85 165.95 170.31 201.32 238.26 283.18
Current Assets
Current Investments - - - - - - -
Inventories 7.87 13.76 18.94 13.05 18.97 24.08 26.78
Trade Receivables 0.29 0.20 0.10 0.23 0.23 0.24 0.27
Cash & cash Equivalents 4.02 5.36 9.64 34.05 50.09 63.52 79.74
Short Term L&A 1.01 1.39 2.26 7.07 7.64 8.25 8.91
Other current Assets 8.50 17.04 8.92 6.31 7.59 8.03 8.93
Total current Assets 21.69 37.75 39.86 60.71 84.50 104.11 124.62
Total Assets 183.71 220.59 205.81 231.04 285.79 342.38 407.81

Cash & cash equivalents 4.02 5.36 9.64 34.05 50.09 63.52 79.74
Other int. bearing assets 0.02 48.97 76.75 88.18 110.23 137.78 172.23
Interest-bearing debt 49.24 70.37 67.39 38.28 34.14 29.29 25.44
Net interest-bearing debt 45.20 16.04 (19.00) (83.95) (126.17) (172.01) (226.53)
Net gearing (%) 47.22% 14.01% - - - - -

Investments
Tangible assets
Gross capex (19.33) - - - (15.17) (16.05) (17.85)
Sale of fixed assets - 21.51 12.71 0.52 - - -
Net capex (19.33) 21.51 12.71 0.52 (15.17) (16.05) (17.85)
Depreciation tangibles (4.08) (4.58) (5.56) (5.41) (6.04) (6.67) (7.38)
Note:- The figures shown in the brackets means NEGATIVE.

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CASH FLOW ANALYSIS

Particulars 201303 201403 201503 201603 2017E 2018E 2019E
EBIT 23.44 35.40 32.03 89.84 94.65 99.06 110.92
Depreciation 4.08 4.58 5.56 5.41 6.04 6.67 7.38
Dep.(ex goodwill) 4.08 4.58 5.56 5.41 6.04 6.67 7.38
Mov.in Inventories 2.93 (5.89) (5.18) 5.89 (5.92) (5.11) (2.70)
Mov. in Debtors (10.91) (6.06) 10.23 (2.34) 0.00 (0.01) (0.03)
Mov. in Creditors 4.77 11.44 (3.80) (3.82) (1.85) (0.09) (0.02)
Other W.C Inc./dec. 1.24 (0.35) (9.22) (5.64) - - -
Change in W.C (1.97) (0.86) (7.97) (5.91) (7.77) (5.22) (2.75)
Tax paid (8.18) (11.14) (9.83) (29.48) (32.89) (34.67) (38.82)
Operating Cash Flow 17.37 27.98 19.79 59.86 60.04 65.84 76.73
Net interest (2.48) (2.76) (3.57) (2.05) (0.67) 0.00 0.00
Cash Earnings 14.89 25.22 16.22 57.81 59.37 65.84 76.73
Gross CapEx (19.33) - - - (15.17) (16.05) (17.85)
Sale of fixed assets - 21.51 12.71 0.52 - - -
Net CapEx (19.33) 21.51 12.71 0.52 (15.17) (16.05) (17.85)
Free CF pre div. (4.44) 46.73 28.93 58.33 44.19 49.79 58.88
Dividend (2.34) (2.34) (2.93) (2.93) (3.66) (3.66) (3.66)
Free CF post Dividend (6.78) 44.39 26.00 55.40 40.54 46.13 55.22
Net acqui./disposals - - - - - - -
Net cash flow (6.78) 44.39 26.00 55.40 40.54 46.13 55.22

RATIO ANALYSIS
Particulars 201303 201403 201503 201603 2017E 2018E 2019E
Return on assets - 10.64% 8.74% 25.68% 23.64% 20.50% 19.22%
Return on equity - 20.45% 15.48% 36.51% 28.93% 23.70% 21.44%
ROCE - 24.70% 17.32% 44.21% 38.48% 31.72% 28.80%

EBIT Margin - 12.26% 10.42% 24.98% 24.95% 24.68% 24.85%

Pre tax margin - 11.30% 9.26% 24.41% 24.78% 24.68% 24.85%
Net Profit Margin - 7.45% 6.06% 15.59% 16.11% 16.04% 16.15%

Total asset turnover - 1.43 1.44 1.65 1.47 1.28 1.19

Fixed asset turnover - 2.51 3.25 4.30 4.45 4.24 4.27
Equity turnover - 2.75 2.55 2.34 1.80 1.48 1.33

Current Ratio - 0.48 0.71 1.33 2.14 2.98 3.96

Quick Ratio - 0.31 0.37 1.05 1.66 2.29 3.11
Cash Ratio - 0.07 0.17 0.75 1.27 1.82 2.53

Receivable Days - 0.31 0.18 0.17 0.22 0.21 0.21

Inventory Days - 15.84 21.93 21.32 20.26 25.74 27.39
Payable Days - 8.53 5.42 5.33 3.50 2.18 1.92
Conversion Cycle (Days) - 7.62 16.69 16.15 16.98 23.77 25.68

Financial Leverage Effect - 1.84 1.90 1.53 1.49 1.49 1.49

Debt to Capital - 0.38 0.35 0.17 0.12 0.09 0.06
Debt to Equity - 0.61 0.53 0.21 0.14 0.10 0.07
Note:- The figures shown in the brackets means NEGATIVE.

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Disclosures & Disclaimers

Disclosures :

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Rudra Shares & Stock Brokers Limited is engaged in the business of providing broking services & distribution of
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Disclaimers:

This Research Report (hereinafter called report) has been prepared and presented by RUDRA SHARES & STOCK BROKERS
LIMITED, which does not constitute any offer or advice to sell or does solicitation to buy any securities. The information presented in
this report, are for the intended recipients only. Further, the intended recipients are advised to exercise restraint in placing any
dependence on this report, as the sender, Rudra Shares & Stock Brokers Limited, neither guarantees the accuracy of any information
contained herein nor assumes any responsibility in relation to losses arising from the errors of fact, opinion or the dependence
placed on the same.
Despite the information in this document has been previewed on the basis of publicly available information, internal data , personal
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exhaustive. It should not be relied on as such, as this document is for general guidance only. Besides this, the research analyst(s) are
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