LONG TERM BUY - GM BREWERIES

GM Breweries

BSE: 507488   NSE: GMBREW   CMP:   96.00

G.M. Breweries Limited engages in the manufacture and sale of alcoholic liquor in India. The company primarily offers whisky, rum, and other liquors.The company is growing steadily and has earned a dedicated customer base. GMBL is the largest manufacturer of country liquor in the state of Maharashtra with a sizeable market share.GMBL is having a state of the art fully automatic Bottling Plant at Virar, District Thane, in the state of Maharashtra with a capacity to produce about 50,000 cases a day. Initially The company started producing 200 cases a day which has now reached to more than 50,000 cases a day.It’s a cash rich company, debt free and the marketcap has been quite low at about Rs 90 crore.The company is expected to post an EPS of about 26 for the present fiscal.So, if you take the present market price of Rs 95, it translates into a PE multiple of less than 4 times, while all other brewery stocks in the same category in the same in the smallcap and midcap have been ruling in a double digit PE multiple.The kind of growth, which is expected from the company in FY11-12, an EPS of Rs 25-26, can get increased to about Rs 35 going forward in FY12-3. So, taking this into consideration, I don’t think that there is any kind of downside because of the debt free status,high promoter stake of 75%, consistent performance, strong presence.Promoters are visionary and should create good wealth for the shareholders in the coming years.A good value buy.