Multibagger that will change things around in Indian Liquor Industry.

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 Sensex marked an astonishing return of over 14% in 2019,a decent return one can see    amid slowdown in auto sector and liquidity crunch in the capital markets.It also tried to follow the same trajectory at the start of  2020 but due to fears of COVID-19 it was    unable to sustain the peak which it shared at the start and nosedived almost 37 % till date.Falling from high of 41945 on 17th  January to 25981 as of 21st march with the increase in number of cases globally.Foreign indices also followed similar trends.    

Also, World Bank president David Malpass echoed her outlook in a post on LinkedIn, writing, “Beyond the health impacts from the Covid-19 pandemic, we are expecting a major global recession.”Analyst are expecting that the index could test the levels of 20000-22000 in shorter span of time.                                                                         

 However, this can be an oppurtunity to trace some of the quality multibagger stocks with outstanding businesses in this bearish market.Quality stocks such as HDFC BANK,     KOTAK MAHINDRA BANK,SBI,ITC are available at more than 50% discount     from their respective 52-week high.As the growing fears of COVID-19 it cannot be said as the bottom of the bearish trend and no  signs of trend reversal can be seen in the  short term.                                                                                                                       

But being optimistic about the Indian economy in the long run we will see good returns on our investments made in year 2020.The above we discussed were the stories of Large cap companies,but the real growth drivers are the Small cap and Mid cap            companies.                                                                                                                      

The main motive of the article is to discuss about a great stocks which belong to Small cap segment and have the potential to deliver 10X-20X returns in Bullish market.It has robust business fundamentals and a good market share in its respective domain-

RADICO KHAITAN  (RADICO)

Radico Khaitan Ltd., formerly  Rampur Distillery & Chemical Company Ltd. is the third largest liquor company in India and an exporter of Indian Made Foreign Liquor(IMFL),country liquor and fertilisers to more than 60 countries.The stock is trading at around Rs 250 and having P/E multiple of 16 which anyone can say a good number in such gloomy days.The idea why we are discussing this stock here because the stock is available at lower premiums as compared to other two liquor giants.The stock has showed annual profits of Rs 228 crores and having market cap of just  Rs 3500 crores while its peers United Spirits(US) and United Breweries(UB) have market cap of Rs 35000 crores and Rs 29000 crores with profit of just Rs.658 cr and 562 cr. Here we can see that with just twice the profits the market cap is 10 times that of Radico, also comparing the last quarter data the sales of Radio grew by 17.18% year on year basis while the sales of United Spirits grew by just 2.91% year on year basis.

The portfolio of th company has 4 millionaire brands like CONTESSA,OLD ADMIRAL,8 PM,MAGIC MOMENTS VODKA. It is the largest manufacturer of IMFL, also Magic Moments Vodka is the 7th fastest selling vodka worldwide and have 56% market share in vodka category.It is a low debt company with a debt of Rs 323 cr when compared with  United Spirits Rs 2572 cr. Also this company is busy in making ehnol based hand sanitizers amid lockdown while other companies have stopped their productions.

 Conclusion- Here I am not suggesting whether to buy or not, it is upon you. The idea where I want to direct your attention is the value of this stock, this year this stock had made a 52-week high of Rs 439 with a market cap of Rs 5870 crores at the same time United spirits also made a high of Rs 742 with market cap of Rs 53900 cr which is 81 times that of its earnings.
 If Radico will follow the same trajectory and grow at a rate on lets say 17%y-o-y basis its earning at the end of 5 years would be around Rs. 500 cr and lets say it will trade at about 50 times that of its earnings (United Spirits trade at about 81 times its earnings) it will trade at minimum of Rs 25000 cr or more market cap in the near future.History says Liqour companies are awarded with great premiums in great times.
If we somehow able to buy this stock at near Rs 175 during the continuous downtrend we would be easily able to get a return of about 10X to 15X within a time span of 5 yrs or less.

Best of luck with your Investments....!!
I



By -The Optimist                                                                                                 
                                                                                                           

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