Globus Spirits – Multibagger Analysis
Update: The current Corona impact could have changed the Future Outlook of this company sector although it Gained 20% from recommended price. You should take updated Inference on Investing this multibagger. You can check other stocks from our latest Multibaggers pack.
Futurecaps is a SEBI Registered Research Analyst providing Multibagger service to Indian Stock Market.
In this post we can explore Globus Spirits as a Multibagger base on Warren Buffet methodologies.
Globus Spirits Ltd.
Founded in 1992, Globus Spirits is the Largest grain based distilleries in India headed by Mr. Ajay Kumar. It is into liquor business for last 25 years and commenced operation in Haryana currently leading player in Haryana, Rajasthan and Delhi. It is using 360 degree business model where IMIL (Indian Manufactured Indian Liquor), IMFL (Indian Manufactured Foreign Liquor), Franchisee Bottling all are held.
The company recorded 20% growth in Net Income & 400% growth in Net Profit. Liquor Business in India is expected to grow at 8% per annum till 2025. Company is running at 85% capacity utilization of 160 million liter.
Warren Buffet, Value & Growth Checklist
Following are the Checklist parameters:
|Capitalization||350 CR – Can provide ample growth in capitalization|
|History of Consistently Increasing Sales, Earnings & Cash Flow||Yes.|
|Durable Competitive Advantage||Moderate.|
|Future Growth Drivers / Sector Growth||Yes.|
|Conservative Debt (long term debt < 3 Net Profit)||No, Debt is high.|
|Debt Equity Ratio, Current Ratio||Debt is high.
Current Ratio is 0.84
|Return on Equity must be Above Average||8%|
|Low CAPEX required to maintain current operations||No.|
|Inventory Turnover Ratio, Debtor Days, ROCE||Moderate|
|Management is holding / buying the stock||Yes, Increasing holdings by Promoters|
|Market Price < Intrinsic Value||Yes with 90% Discount. Intrinsic Value Calculator|
|Stock Price is consolidating (now)||Yes|
|Stock Price is growing in past years along with EPS growth||No, North-South curves exists|
|Consolidated PE, PB Ratio, PEG Ratio||PE 9
|Cash Flow Positive, Net Profit % greater than 8%||Cash Flow: NegativeNet Profit %: No|
|Paying Dividends, Tax||No Dividends
|EPS Growth Rate||50% above past 2 years|
|Jump in Trailing Result EPS||Yes|
|Jump in Quarterly Result EPS||YesBut, March q-o-q shows decline in profits|
|Expected Gain in 5 Years||300-500%|
|Price Movement Graph, 52 Week High & Low||Okay|
|Volume Analysis||1.2 Lakh|
|Power of Brand||Yes|
|Corporate Governance, Reputation of Leaders||Yes|
Here are the positive factors regarding Globus Spirits
- Company is in growth spree
- Company is quoting near book value – Safe to enter now
- Promoters are increasing stake
- UNIBEV alliance will help to grow faster
- Budget 2020 will help growth in Sales
Here are the concern factors regarding Globus Spirits
- Debt is high
- Cash Flow is negative
- Government Regulations can impact Profitability
Based on the above analysis I would like to say that the Globus Spirits possess Multibagger Stock properties and one can Invest in 2020. However one should not expect high compounded returns from this stock. It can be considered as Moderate Risk Moderate Returns investment.
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