Target: ₹587
CMP: ₹507.50
Founded in 1999 by Rajeev Samant, Sula Vineyards Ltd. (SVL) is a leading winery in India, with a revenue split of 92:8 (FY23) between its wine business and wine tourism. The winery has an impressive portfolio of 56 own wine brands and 21 international third-party wine and spirits lables.
As of FY23, it has six production plants in Maharashtra and Karnataka, with an installed capacity of 16.7 Mn liters and sources grapes from over 2,800 acres of land from more than 500 framers. SVL holds 52% of India’s unfortified market share in volume terms and 61% in elite and premium segment in value terms (FY23).
During FY21-23, their own-brands business and wine tourism achieved 13 pe cent and 17 per cent CAGR growth, respectively. Further, the Company increased its plant capacity by 14 per cent on YoY basis to 16.7 Mn liters in FY23, whereas they increased the room capacity by 49% to more than 100 rooms in over 15 months ending Q1 FY24.
We believe that SVL’s wine consumption will grow at 15 per cent volume and 4% price in FY24, and it will maintain its market leadership, and further empower its moat. Therefore, we initiate coverage on SVL with a BUY rating using relative valuation by discounting the 10-year median EV/EBITDA multiple of USL by 25 per cent, giving a target price of ₹587.