Tilaknagar Industries: This Liquor Stock Gained Over 1000% in 5 Years; Should You Invest Now?

Tilaknagar Industries has been a big win for its investors. Over the past five years, the company’s stock price has jumped from ₹19 to ₹224.50, giving an impressive gain of 1081%. In November, the stock even hit a 15-year high of ₹291.

Despite this huge increase, experts believe the stock is still fairly priced considering the company’s current performance and size.

Rapid Growth

Tilaknagar Industries is a leader in the Indian-made foreign liquor (IMFL) brandy market, making up 93% of its total sales. It holds about 20% of the market share in this segment.

In the higher-end Prestige & Above (P&A) segment of brandy, the company commands around 28% of the market. Its main brand, Mansion House Brandy, is the best-selling brandy in India and the second best-selling in the world.

According to Drinks International’s report “The Millionaires Club 2023,” Mansion House Brandy is the world’s second-fastest-growing brand across all categories.

The company’s other major brand, Courrier Napoleon Brandy (CNB), targets the deluxe to super-premium segments. Both Mansion House Brandy and Courrier Napoleon Brandy have seen strong growth, with Mansion House Brandy growing 33.2% and Courrier Napoleon Brandy growing 35% in volume from FY21 to FY23.

India’s liquor market is growing fast due to rising incomes and a young population. Trends like premiumization, new flavored options, and more people drinking outside their homes are expected to further boost the market.

Strong Volume Growth

According to Systematix, Tilaknagar Industries is focusing on premiumization and expanding its product range and geographic reach. The company has overcome past mistakes and now has a clear growth plan for the medium to long term.

The company’s strong growth, improved financial health, and capable management team show its new direction.

Systematix highlights the company’s impressive volume growth in brandy due to its leading position, low competition, increasing popularity, and various price points within the brandy category. The company is also exploring new product categories for further growth.

From FY21 to FY23, Tilaknagar Industries achieved a 33% volume growth mainly driven by brandy. During this time, brandy’s share of total volumes rose from 84% in FY18 to 93% in FY23. The share of rum dropped from 10% to 5%, while vodka and gin remained steady at 1-2%. Whisky’s share, however, fell from 4% in FY18 to 1% in FY23.

In recent quarters, the company’s volume growth has consistently outpaced the Indian Made Foreign Liquor (IMFL) industry.

Debt-Free Balance Sheet

With almost no debt and limited capital expenditure plans, Tilaknagar Industries is boosting its brandy market share by increasing marketing and promotion, especially in the South.

Stable input costs, continued premiumization, and an improved product mix are expected to help expand profit margins.

Financials and Valuation

Systematix projects revenue growth at a compound annual growth rate (CAGR) of 13.3%, EBITDA growth at 18.6%, and profit before tax (PBT) growth at 29.9% from FY24 to FY26. This growth is mainly driven by a 12.3% CAGR in volumes, excluding new non-brandy segments.

“The stock has significant re-rating potential given its debt-free status, over 20% return on equity (RoE), and above-industry growth. We recommend buying with a target price of ₹317, based on 35 times FY26 earnings,” said Systematix.

The brokerage notes that Tilaknagar’s peer, Radico Khaitan, trades at 42.2 times consensus earnings, while larger multinational corporations (MNCs) trade at over 50 times earnings.

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