Shares of Sula Vineyards soared nearly 15 per cent to a high of Rs 637.70 per share on January 8 after CLSA shared a ‘buy’ rating on the counter. The global brokerage firm has raised the target price of the winery to Rs 863 per share from Rs 571 apiece, implying an upside of 42 per cent from current levels.
In the past one month, the stock of Sula Vineyards has gained over 17 per cent as against a 3 per cent rise in the BSE Sensex. Earlier, Sula Vineyards shares touched 52-week high of Rs 567 per share on January 5, 2024.
CLSA’s upgrade comes after the Maharashtra government announced a revival of the Wine Industrial Promotion Scheme for five years. As per this scheme, Wineries are charged a Value Added Tax of 20 per cent , of which 16 per cent is refunded as rebate. The state cabinet also approved the refund of the rebate under this scheme for four years starting financial year 2021.
Maharashtra is Nashik-based Sula’s largest market, accounting for nearly half of its revenue and nearly 45 per cent to 50 per cent of volumes, according to CLSA. “In our view, this removes a major distraction for investors, who can now focus on the long-term opportunity for wine consumption and wine tourism in India,” the note said.
The brokerage also highlighted that with a rising middle-class, fast growth of restaurants and rising incomes, wine consumption is likely to grow at a Compounded Annual Growth Rate (CAGR) of 15 per cent over the next 10 years, highlighting Sula to be the biggest beneficiary as it has a market share in excess of 50 per cent , making it the market leader.
Sula is also a leader in wine tourism, according to CLSA, which is also a revenue driver and is increasing the interest of wines in a country where advertising alcoholic beverages is not allowed. The company is also planning to expand tourism at its wineries beyond Maharashtra.
CLSA has raised its financial year 2024 – 2026 estimates for Sula by 0 per cent and 4 per cent respectively.
Wines sold in Maharashtra account for an annual turnover of Rs 400 crore, said Jagdish Holkar, President of the All India Wine Producers Association. He also said that around Rs 70 crore to Rs 80 crore gets paid annually as VAT, of which 80% will be refunded.
All five analysts who track Sula have a “buy” recommendation on the stock. CLSA’s price target is the highest among the five.
Shares of Sula Vineyards ended 11.5 per cent higher on Friday at Rs 556. The stock has risen 55 per cent from its IPO price of Rs 357.
Comments
0 comment