Thursday, 11 February 2016

Associated Alcohols & Breweries Ltd - Multibagger Pick



The Ace Investor
Associated Alcohols & Breweries Ltd
  Listed on BSE: (CODE: 507526 SCRIP NAME: ASALCBR)
Currently trading around 180 with a market cap of around 180 crores.
Promoters hold 58.45% stake.
It has a Debt of around 45 crores.
Total Reserves are around 59 crores.

Established in 1989 Associated Alcohols & Breweries Ltd (AABL) is one of the largest distilleries in India headed by the Kedias of of The Associate Kedia Group.

The company has presence in every aspect of value chain: All varieties of portable alcohols, Country liquor, High quality rectified spirits, Extra Neutral Alcohol, Extra fine triple distilled grain spirit, IMFL in whisky brandy rum gin vodka categories, Bottling scotch whisky for international brands.

Company has great relationship with Liquor Majors which buy almost 60% IMFL produced by AABL and the remaining is used for direct supplies to to branded suppliers across the country, apart from manufacturing its owned brands.

AABL has someone of the top selling brands under its kitty, Top AABL licensed brands are: Blackdog, Smirnoff Vodka, Captain Morgan Rum, HAIG Scotch, Glen Drummond, Royal Crown.

Many of these brands are owned by United Spirits Ltd.

AABL apart from licensed brands also started a range of owned brands like: Mc Gill Whisky, Jamaican Magic Rum, Bombay Special, London Bridge gin, Red & White Whisky.

The company has its facility in Indore.
AABL has chalked out a huge greenfield expansion plan to capture domestic and international demand and serve all the segments of alcohol ranging from country liquors to IMFL. This plan includes setting up a multi-pressure ENA plant, a collector plant, a Reverse Osmosis Water Treatment Plant and a 2 MW power plant.


AABL is setting up a multi pressure ENA plant. This plant will completely replace the older plant and increase our production capacity from the present 42 MLPA to 65 MLPA. The multi-pressure ENA plant cuts down the stages in the manufacture and thus improves process efficiency.

Coming to the financials, AABL has shown great growth :-

As you can see the company has grown at a RAPID pace in five years from 90 crores topline it has come to almost 300 crores and H1-FY16 has been flat which means that the topline bump up was sustainable and now company is going to report results tomorrow which i expect to be good. United Spirits one of AABL's major client has reported good revenue bump up in Dec qtr.

The company also paid dividend for the first time in last many years in FY16.

The management has also approved 1:1 Bonus, final call on Bonus will be taken at the EGM on 22nd February 2016.

For full year 2016 it can be expected that last two quarters should be good, Means EPS of 15+ should be on the cards. 

Liquor sector is really hot right now, United Spirits which is also major client of AABL is trading at astronomical valuations because the brand ownership it has, It is often said that United Spirits after dust of previous management settles can be a significant Multibagger in next few years... All that said about future, AABL is already making money from the brands of USL.

Our earlier pick in liquor sector was Pincon Spirits Ltd which was given at 115 and it has now touched 150+ after bonus of 1:1 meaning it gained almost 160% after catching our attention. GM Breweries is another great story in this sector, Which went from Rag of 100 to Rich of 1000+ in just 1 year.

Irrespective of stock market conditions, In India the consumption theme is one of the best investment themes. One major hype has been Liquor Ban here and there but in reality, Major tax revenue for both central and state governments are from Liquor and Tobacco sector and no one in the world kills the goose that lays the golden eggs.

Promoters hold 58.45% stake, Some 5 Marwadi guys hold 2.22% stake together, Interestingly the regd. office of AABL has been in Kolkata and two Kolkata financial market entities Garnet Tradelink and Attic Dealcom both having same directors hold another 20% almost.

That means almost 80.67% equity out of total 9039600 shares are with promoters and other Marwardis means only approx 17 lakh shares might be left with small shareholders.

I feel Associated Alcohols & Breweries Ltd (AABL) is one multibagger opportunity in the market, with such great growth and wonderful positioning in the value chain it should be trading at really premium valuations on its EPS of 15, assuming 35 times valuations to its EPS would give stock price of 525+.

Key trigger for re-rating could be the 1:1 bonus which will drive liquidity in the stock that can improve the valuations.

At cmp of around 180, The stock is trading at a P/E of only around 12. 

Apart from the fundamentals, Technically too AABL is looking very bullish. AABL is close to breakout of Cup and Handle pattern on daily charts and a key thing to note is that the stock is having a Higher High and Higher Low trend which is really mid-term long-term bullish.

The market has been crashing nowadays and it looks like we are pretty much near the bottom now since if Nifty has to fall further the High Weightage biggies have to crash significantly but that does not look on the cards. Why we chose liquor sector right now is because, This sector is almost recession proof and as they say People Drink in Joy and also in Sorrow.

Note: The above is not a research report but information as available on public domain and it should not be treated as a research report.

Registration status with SEBI: I am not registered with SEBI under the (Research Analyst) regulations 2014 and as per clarifications provided by SEBI: “Any person who makes recommendation or offers an opinion concerning securities or public offers only through public media is not required to obtain registration as research analyst under RA Regulations”

Disclosure: It is safe to assume that i might have Associated Alcohols & Breweries Ltd in my portfolio and hence my point of view can be biased. Readers should consult their financial advisory before any investments.

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24 comments:

  1. Apologies to readers who couldn't read blog after 3:20, there was some server error on Google's side because of which many of you could not read blog in time.


    The Ace Investor

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    Replies
    1. Hi Sir, I posted thrice regarding Associated Alcohol in last two posts. I asked you for reply but didn't get. Now I understood that you want to reply like a full report on it. Thanks Sir, finally there is recommendation on the stock which I am holding and asked for ur views.

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    2. First I would like state That even though there is a thread in this same name I started this new because I wanted to highlight the aspect accounting problems and number fudging in Various small cap companies I have already posted the positive aspects of this company many times in this forum and hence felt responsible to bring this to the notice of members.
      This time when I was in Indore again I visited them and asked the following doubts from the AR 2015
      As per the ar the median salary is 1.28 lac for 301 employee the key management consists only of two people Ashish Gadia and Deepak drawing only around 7 lac
      Whereas the two directors are taking 3 cr each
      The related party transaction shows 6 cr as salary paid
      The other expenses fy 15 67 cr also shows a substantial increase and you basis there is drastic increase In other expenses even though they have captive power.
      My question was to them to explain the above.
      I also raised the doubt about 32 cr loan and guarantee extended to the related party.
      Thirdly the Independent auditor remark regarding the the transactions under taken in related party names
      And about the even segmenting the revenue under bottling and capative that is under licence do manufacturing and only bottling as per cenvat requlations
      None of the above questions were answered by there CFO nor anybody is willing to share any sort of info ration regarding the sudden increase in employee cost I even went to there auditors office there also same story.
      Above all they were rude and dismissed me by telling that if don't like sell the share and go away why worry.
      This I wanted to bring to notice of the forum members because I thought I am also responsible since I have given earlier positive feed back about this company and I started anew thread with this mind.
      I may be wrong because of my limited knowledge in accounting procedures but I was worried at the transparency level of the management and there attitude towards a minority share holder shows there is something wrong in the quality aspect
      I think this is what ayush was also trying to highlight hope it is helpful
      I want senior members to highlight to retail investors like us to find such accounting problems in various small cap companies.
      Discl. Not invested as of now
      http://forum.valuepickr.com/t/associated-alcohols-breweries-ltd-doubts-regarding-the-transparency/4207

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    3. Piyush please read the latest update from where you are copy pasting this :-

      this further to my post regarding the way i was treated in there office i have posted a strongly worded email explianing this to one mr.prasanna kumar kedia promoter director giving my local address and mobile number (i was staying in sayaji hotel indore)
      to my pleasnt surprise i got a call from one sumit jaitley telling me that he is newly appointed cfo and my interaction was with some accounts guy and he is not the cfo even though he was sorry if somebody has not answered my querry.
      and also he further stated that the director salary commensurate with there vast experience in the field and unlike other companies were the directors are paid commission on profit and extra benefits like club membership etc here the company has calculated the total CTC basis for salary (cost to company).
      as regards the salary to the related party he said that it is decalred in the annual report that they have associate company mount everest breweries ltd and namada distellery werein the parent company has a substanial holding by way of unquoted equity and directors do hold positions and the salary is extended to mangerial cadre under the provisions of associate company salary and it is properly decalred
      secondly he said that that the investments made by the parent comapny in mount everest breweres ltd which is producing mainly beer for the local market under brand name le mount and supplying to UBL will bear benefits in future to the parent comapny by way of dividends or interest accural on loans or option of amalgamation.
      he also reminded me that now they have fully functional web site and decalred dividend and board is also considering bonus issue for the benenfit of investors.
      also he further stated that they increased employee strength and with full capacity utilisation they can improve the top line in coming years and cost reduction in power and raw material and production will drastically improve the bottom line in coming years.
      i was happy that they responded hope this post is useful

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    4. Thank you very much for posting this artical..... i am also bullish for this script... 25th of jan. i also suggested to my frds this script... i am expecting 220 in short term...

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  2. Excellent pick, huge potential to become multibagger, thank you

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  3. Hope it turns out to be like pincon :-)

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  4. Good results + bonus issue = Mulibagger :-)

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  5. Good results + Bonus issuse = Multibagger :-)

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  6. Associated Alcohols and Breweries posted excellent result, massive jump in bottomline. Net profit increased to 4.54 Crores from 2.71 Crores YoY, increased to 4.54 Crores from 3.03 Crores QoQ. Congrats to those who are holding with conviction. Cheers...

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  7. Excellent result Mr. ACE. You are the best in all....!
    Bravo SIR... You have given an extra ordinary call just like Pincon... This will rock in days to come.. The result will shut the doors for your naysayers.. Keep up the good work brother

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  8. Greats results by AABL, Bottomline has moved up considerably and the EPS at 9 months stands at 11 means it should be able to achieve annual eps of 15 easily and may out do it rather..

    Going forward from here, Expecting major topline increase for the company in next FY as it starts "growing" forward.

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  9. Sir I read your recommend and the comments made by the members who visit this site I thank you sir for doing a good job.

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  10. Hi Ace ,, Ur View on GM Breweries for long term ..

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  11. sir whn can we expect the expansion to be completed?

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  12. I posting this because you have copy pasted my post from valuepickr further to this I even registered a compliant in scores for which also I got reply wherein they have explained that the Mount Everest breweries ltd does not fall under associate company category and employee cost is inclusive of gratuity provisions of 1.2 cr but still they are unwilling to clarify why 6 cr is paid as salary to related party if Mount Everest breweries is not an associate company then whom they have paid 6 cr and why 30 cr bank guarantee is given apart from this everything is ok but the top line growth is staggering and the present valuation seems ok until growth visibility is seen in fy 17 and clarity comes regarding there investments in Mount Everest breweries it is a wait and watch game. I cannot comment about the multi bagger claim but it is a stock to watch.

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  13. consumption play will definitely attract momentum after the budget.i can enter only below 118.if price will not touch 118 than will only enjoy the show.

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  14. Dear Sir,
    Kindly refer me some good books regarding stock investment. Thanks in advance.
    Sundar

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  15. Hi can I invest in this now the price is @ 86rs
    And what should be the bracket order

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  16. Dear sir,

    How much price are you expected after bouns?? After bonus will it go 300 in six month or not?? Pls advise...

    Waiting for your reply...

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  17. Thank you so much for sharing.

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  18. Can buy AABL now?why it is going down? please suggest!

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  19. Hi AceBro, do you foresee this heading to 180-200 levels once it crosses 155-160 in current momentum?

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