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Motilal Oswal
Manpasand (Buy)
CMP: ₹574.75
Target: ₹761
Manpasan Beverages reported flat sales growth in November, mainly due to the cash crunch post demonetization. However, management expects growth of about 5-10 per cent in December with improving new currency circulation. We believe demand for Mango Sip and Fruits Up should not be affected much once the demonetisation-led impact subsides, given that they are low-ASP products.
With QIP proceeds of ₹500 crore, Manpasand plans to double its capacities (from over 1.77 lakh cpd to over 3.77 lakh cpd by 4QFY18) by setting up four new plants (one each in Baroda, Varanasi, north east or east, and south India). The company will particularly focus on ramping up capacity in the south given the low contribution from this region to its overall revenues. According to management, all four plants will be up and running by 4QFY18, and full benefits will be seen in FY19.
We broadly maintain our estimates for FY17E/FY18E. The company’s presence in smaller SKU products, addition of new capacities and foray into newer geographies provide us comfort. Also, its planned advertisement campaign for Fruits Up should complement its recent Fruits Up capacity addition at Ambala. Thus, we expect Manpasand to register robust revenue and PAT CAGR of 54 per cent and 64 per cent, respectively, over FY16-19E.
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