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Top 5 Liquor Stocks to Add to Your Watchlist

Jun 21, 2022

Top 5 Liquor Stocks to Add to Your Watchlist

Liquor stocks are categorised as "sin stocks", which includes marijuana stocks as well as tobacco, gambling, and weapons companies.

India does not appear to be among the countries with the highest per capita liquor consumption.

However, it is also true that Indians consume over half of all whiskey produced worldwide. This is largely due to India's enormous population and preference for whiskey.

The WHO report of 2016 also claimed that India alcohol consumption has increased from 2.4 litres to 5.7 litres.

Although consumption in the country is affected by the bans implemented in various states, the breweries exports have increased, resulting a strong profit over years.

Here are five companies to add to your liquor stock watchlist.

#1 United Spirits

The first stock to watch out for is United Spirits.

United Spirits is the world's second-largest spirits company by volume. It is headquartered in Bangalore.

The company produces several famous brands such as Antiquity, McDowell's Royal Challenge, Signature, Black Dog, etc. It exports its products to over 37 countries.

The company's revenue over the last 3 years has delivered the Compounded Annual Growth Rate (CAGR) of 1.16% and de-growth in the net profit of 17.95%.

This de-growth in profits of the last 3 years was a result of pandemic lockdowns and high inflation in 2020 and 2022 respectively.

The company has given a Return on Capital employed (RoCE) of 18.7% and a Return on Equity (RoE) of 17.2% in the past 3 years.

It is currently expanding its luxury and premium portfolio through the implementation of scotch with the single malt brands Talisker and Singleton in Scotland.

To know more about the company, check out the United spirit's financial factsheet and its latest quarterly result.

#2 United Breweries

The second stock to watch out for is United Breweries.

The company is India's largest beer producer headquartered in Bangalore, India.

It distributes beer under the Kingfisher brand and owns various other brands of alcoholic beverages.

It has a market share of 40% in the Indian brewing market and has 79 distilleries and bottling plants around the globe.

The company has delivered de-growth in revenue at a CAGR of 2.45% and in net profit of 13.34% over the past 3 years.

This decline over the last 3 years in both revenue and profit was a result of inflationary pressures in the packaging materials, as a result of commodity price increases, low working capital management, and an increase in the taxes by the government.

United Breweries has given an ROE of 11.7% and ROCE of 16.7% on average in the last 3 years.

The company is planning on expanding its Rajasthan unit for the supply of premium brands to north India. The company also plans to focus on the completion of the key ongoing projects with an outflow of less than Rs 2,000 m.

To know more about the company, check out the United Breweries financial factsheet and its latest quarterly result.

#3 Radico Khaitan

The third stock to watch out for is Radico Khaitan.

Radico Khaitan is the third largest liquor firm in the country. It manufactures industrial alcohol, Indian Made Foreign Liquor (IMFL), country liquor, and fertilisers.

Radico's brands are sold in more than 85 countries, including the US, Canada, South America, Africa, Europe, and many more.

Radico sells its products under the brand Rampur Whiskey, 8PM whiskey, and Magic Moments vodka.

The company over the last 3 years has delivered a Compounded Annual Growth Rate (CAGR) in revenue of 9.8% and in net profit of 29.89%.

The poor revenue growth over the last 3-year was due by the pandemic and inflation. Inflation increased other expenses of the company reducing the profits.

However, the company has given an ROE of 15.7% and a ROCE of 18.1% in the past 3 years.

The board of the company has approved the conversion of an existing 140 KL per day molasses plant Rampur UP into dual feed. It has also decided to set up greenfield grain-based distilleries at Stiapur, Uttar Pradesh.

'To know more about the company, check out Radico Khaitan's financial factsheet and its latest quarterly result.

#4 Globus Spirits

The fourth stock to watch out for is Globus Spirits.

The company operates through four segments namely Indian Made Indian Liquor (IMIL), Indian Made Foreign Liquor (IMFL), IMFL Bottling, and Bulk Alcohol.

Its famous brands include Officer's Choice, White Lace, Samurai Rana, Rajasthan No 1, Ghoomar Samalkha No 1, etc.

Global Spirit, in 3-years, has reported a CAGR growth of 29.69% in the revenue and growth in the net profit of 84.19%.

Due to the new capacity addition in West Bengal and resumption of Haryana and Bihar facilities the company has showed a positive growth in revenue and net profit.

The company has reported the ROE of 14.6 and ROCE of 18.02% over the last 3 years.

The company is looking for expansion in the capacity in the state of Bihar by 140 kilo tonnes per day and expansion of Jharkhand distillery in next year. This will increase the company's capacity from 500 KLPD to 940 KLPD.

To know more about the company, check out Globus Spirit's financial factsheet and its latest quarterly result.

#5 Associated Alcohol and Breweries

The last stock on the list is Associated Alcohol and Breweries.

Since its initial stages, the company has been a leading producer for the Government of Madhya Pradesh.

Its leading brands include Royal Falcon Gold Seal, Jamaican Magic (rum), Karapov Vodka etc.

It has grown at a CAGR of 7.7% in revenue and 26% in net profit over the 3 years.

Due to steady growth in sales and improved efficiency has led to growth in the net profit. Due to value-added IMFL brands, the company is able to pass on cost increases to its customers.

On average, over last 3 years, the company has given ROE of 25.67% and ROCE of 33.27%.

The company plans to expand the Khodigram Barwaha distillery by adding ENA manufacturing of 30 m litres of alcohol production.

To know more about the company, check out Associated Alcohol and breweries' financial factsheet and its latest quarterly result.

Why should you include liquor stocks as a part of your portfolio

Indian liquor stocks have given multi-bagger returns over the years which has made the industry a great attraction for value creation.

The Indian liquor industry is one of the fastest-growing alcoholic industries in the globe and is expected to show an upward journey over the next few years.

The recent announcement about the tax SOPs(Standard Operating Procedures) by some of India's largest states - Uttar Pradesh, Delhi, West Bengal, and Andhra Pradesh - has led to a rise in consumption of both Indian-made foreign liquor as well as imported liquor.

There is competition in this sector to capture market share, giving investors value and growth opportunities.

Hence one must view these stocks as the value creators for the coming few years.

If you are planning to invest, assess the fundamentals and do your research, to ensure these stocks are a fit for your portfolio.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...

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