Som Distilleries: A small cap beer co, based out of Bhopal, has 3 millionaire brands (sells million cases p.a.) β Hunter, Power Cool & Black Fort. Currently has presence in MP (55% rev), Karnataka (25% Rev), Odisha (15% Rev), UP, Kerala, Delhi. A quick thread π
1/10
1/10
Co currently has 3 plants β Bhopal (state-of-the-art), Karnataka & Orissa. While Karnataka facility is running at 100% capacity utilization, Bhopal & Orissa are running at 65% utilization. Co is in the midst of significant capacity expansion.
2/10
2/10
Increasing canning capacity in Bhopal from 15k cases/day to 65k cases/day. This additional capacity is expected to be operational by Feb end & be ready for the upcoming season - can expect it to run at 100%. Post this, Som will have Indiaβs largest canning facility.
3/10
3/10
Co is also doubling its wheat beer (Woodpecker) capacity in Karnataka from 4.5mn cases to 8.5mn cases. In Orissa expansion will take capacity from 3.5lac cases/month to 8lac cases/month. The total capex stands at 150cr of which 70cr has already been expended.
4/10
4/10
While co plans to sell 12.5mn cases in FY23, post expansion co can potentially sell 20mn cases p.a.
Current Market Standing:
MP β 1 (45% mkt share)
Karnataka β 3 (aims to be no 2 in this season)
Odisha β 2
Kerala β 3
Delhi β 3
5/10
Current Market Standing:
MP β 1 (45% mkt share)
Karnataka β 3 (aims to be no 2 in this season)
Odisha β 2
Kerala β 3
Delhi β 3
5/10
Apart from going deeper in existing mkts like Bhopal, Karnataka & Orissa; co is expanding aggressively (potential to grow 200-300% in this season) in UP where its products have received very good response. Other new mkts are Maharashtra, Jharkhand, WB
6/10
6/10
Companyβs major sales happen via government canteens (CDS) & has majorly targeted states where distribution happens via this channel. States like Maharashtra where distribution is private, company has been wary of expanding at a rapid pace.
7/10
7/10
With 2x expansion, strong entry barriers, millionaire brands, favorable govt policies & powerful consumption tailwinds, co has the potential to grow profitability at 50-60% CAGR over FY23-FY25. Single digit valuation on FY25 earnings: 7-8x PE makes risk reward favorable.
8/10
8/10
While promoter holding is low currently, they have been increasing their stake over the past few qtrs: 24.5% in Dec '21 to 33.3% currently. Promoters keen to take this to 51% over the next 3yrs. New gen has been instrumental & should be a key driver for re rating
9/10
9/10
Risks:
Government policies (if state govt decides to ban alcohol)
Distribution (no advertisements allowed + govt controlled)
Promoter legacy (arrest warrant issued in GST case, given a clean chit, low holding but now moving up)
10/10
Government policies (if state govt decides to ban alcohol)
Distribution (no advertisements allowed + govt controlled)
Promoter legacy (arrest warrant issued in GST case, given a clean chit, low holding but now moving up)
10/10
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