Multibagger Tip: Pincon Spirit Ltd CMP 115 TARGET 700.

About The Company & Business
Pincon Spirit Ltd (PSL) is headquartered in Kolkata, West Bengal.
The company incorporated in 1978 is promoted by Mr Manoranjan Roy who was recently awarded Outstanding Entrepreneurship Award for outstanding and exemplary achievements in Entrepreneurship from Enterprise Asia at the Asia Pacific Entrepreneurship Awards 2015.

PSL is in branded IMFL business. Product portfolio includes: Highland Blue Deluxe Whisky, XXX Rum, King's Coin Vodka, Pincon 9000 Beer. The company also deals in country spirit and edible oils.

The corporate office of the company is located in Bengaluru. The company is having its factories in Kolkata, 24 Paragnas and Agra (U.P).

PSL is listed on the BSE via direct listing norms and it has also submitted the application to list on NSE last month.

Kuntal Chatterjee is the COO of the company. Mr Chatterjee was a part of Allied Blenders & Distillers the makers of Officer's Choice which is a very successful brand. Mr Chatterjee has also held responsible position at Diageo.

The Ace Investor - Value Pick
PINCON SPIRIT LTD.
BSE: 538771
PSL is currently trading around 115 with a market cap of around 120 crores.
Total Debt is around 62 crores, 52 week high is around 200 and 52 week low is around 70.

PSL is having presence in the sates of West Bengal, Assam, Arunachal Pradesh, Jharkhand, Orissa, Sikkim, and Daman. The company is having its own brand in multiple states and is also having state specific brands.

PSL is aggressively building a brand-business, Recently the company has started electronic media promotions for its Highland Blue Whisky via Music CD Ads in W. Bengal and it has also opened 7 liquor retail outlets at prime locations in Kolkata. The company has also announced plans to market its recently launched XXX Rum and Orange Gin via Music CDs.

PSL is going to invest INR 400 crores on expansion over next two years, While around INR 120 crores will be funded through internal accruals remaining will be via Bank Loan and Market Borrowing.

Currently, PSL is having IMFL production capacity of 1.2 million cases a year and it plans to increase it to 3 million cases over the next two years. PSL is going to launch its IMFL products in four high liquor consuming states of Tamil Nadu, Andhra, Telangana and Delhi in phases.

The company is also looking at alternative packaging strategy to boost its sales, It is investing 6-8 crores in its bottling plant in Rajarhat to introduce tetrapaks for some of its brands. Tetrapek offers an opportunity to retail less than the conventional 180ml bottles which increases sales for economical liquor companies as seen in state of Karnataka. PSL is also planning to invest Rs 50 crores to acquire some bottling plants, one being the country spirit bottling unit at Kharagpur with a capacity of 3 lakh bottles per day and another in Burdwan with a capacity of 2 lakh bottles per day.

Coming to the financials, PSL has grown really well in the recent times. Take a look at the results table below :-


From sales of around 100 crores in FY11, PSL had grown to 380 crores+ sales in FY14 and now so far in the nine reported months of FY15 it has already reported topline of more than 420 crores and at end of FY15 it is expected to post sales of 575 crores and a net profit and eps of around 14. Looking at the growth and expansion plans it looks like PSL will meet its managements guidance of 1500 crores topline in FY18 and that will take the EPS to about 34.

From sales of around 100 crores in FY11, PSL had grown to 380 crores+ sales in FY14 and now so far in the nine reported months of FY15 it has already reported topline of more than 420 crores and at end of FY15 it is expected to post sales of 575 crores and a net profit and eps of around 14. Looking at the growth and expansion plans it looks like PSL will meet its managements guidance of 1500 crores topline in FY18 and that will take the EPS to about 34.

On the valuations front, with FY15 EPS of about 14 at current price of 115 the P/E ratio comes at around 8.25. The industry average p/e of the sector is around 69.

PSL can be directly compared with brand-centric Som Distilleries & Breweries Ltd which is trading at a P/E 30 that too despite the fact that SOM has not been growing fast like PSL. Another company in this sector is Tilaknagar Industries (TIL) which was trading at a p/e of around 17 before it started reporting losses and inconsistent results. TIL too is actually not a high-growth company like Pincon so it cannot be a taken as a benchmark and other company called GM Breweries Ltd which is trading cheaply does not have any aggressive brand business and retailing its products cheaply with no brands to show.

Note: Regarding the promoter holding, Much like ITC the promoters have declassified themselves as non-promoters but see the shareholding pattern almost 30% is with Mr Roy and another 30% lies with board member owned companies and other Kolkata based groups. Which means about 60% of the equity is with people running the company.

All in All i feel, PSL is a great opportunity for long-term investors and looks set to be a multibagger. At 115 or even at 200 it looks a great potential multibagger stock to buy with eyes set on growth.

If we take a modest P/E of 20 then Pincon Spirit Ltd should be currently trading at around 280 and if we take the FY18 expectations of 1500 crore top-line then with EPS of around 34 at P/E of 20 the stock price should be 680. Remember high growth companies attract expensive P/E rating. NSE listing is imminent now and it is expected to trigger major re-rating in this stock.

:Links:
Pincon Website: https://pinconspirit.in/

Pincon Annual Results: https://www.moneycontrol.com/financials/pinconspirit/results/yearly/PS18#PS18

Pincon Nine-Month Results So Far: https://www.moneycontrol.com/financials/pinconspirit/results/nine-months/PS18#PS18

Pincon Expansion News: https://articles.economictimes.indiatimes.com/2015-04-24/news/61493977_1_400-crore-imfl-next-two-years

Pincon Tetrapak News: https://www.telegraphindia.com/1150425/jsp/business/story_16569.jsp

 

Hello VJ John.

Thats a nice pick, but am just concerned about one thing...could you explain why the promoter is not holding even 0.01% of shares.
What is it exactly...could you pls explain.

Without promoter holding...i find this company as really Funny or Penny...pls throw some light

 

This post should be moved to stock picks of wizards.