I think the slow down in top line is apparent – although if I wanted to give the management the benefit of doubt, then there may be several one-offs in Q1 and Q2 FY25 that may have resulted in sluggish numbers – as explained below
- Q1 FY25 headwinds: Ban on sale of alcohol due to elections, Pune Porsche incident resulting in bar closures (based on a quick google search Only 23 pubs in Pune city are authorised: RTI reveals – Hindustan Times)
- Q2 FY25 headwinds: Karnataka policy to reduce excise seems to have resulted in lower supplies by manufacturers until policy officially notified (Rates of premium liquor come down in Karnataka – The Hindu), Delhi excise portal malfunction (https://indianexpress.com/article/cities/delhi/excise-portal-up-and-running-after-weeks-of-malfunction-relief-for-liquor-traders-9599023/)
In any event, these could also be excuses – but thought of at least presenting the other side as indicated by the management.
Looking at the numbers in the table below more closely – I am only focusing on Own Brand sales here – as a general conclusion, growth has slowed at the Total Own Brands level .
| Q1 FY24 | Q2 FY24 | Q3 FY24 | Q4 FY24 | Q1 FY25 | Q2 FY25 | |
|---|---|---|---|---|---|---|
| Own brands revenue by categories (Rs mn) | 1,017 | 1,268 | 1,928 | 1,129 | 1,146 | 1,272 |
| Elite | 751 | 932 | 1,485 | 848 | 814 | 1,018 |
| Premium | ||||||
| Economy | 266 | 336 | 443 | 281 | 332 | 254 |
| Popular | ||||||
| Own brands revenue growth by categories | 29.9% | 11.9% | 3.9% | 9.1% | 12.7% | 0.3% |
| Elite / Premium | 39% | 15% | 7.4% | 14.3% | 8.4% | 9.2% |
| Economy / Popular | 10% | 4% | -6.3% | -4.0% | 24.7% | -24.3% |
However, there is a difference between the segements – Premium / Elite is still growing – e,g. it was 9% YoY in Q2 FY25. This is much less than the suggested mid-teens growth guided in Premium / Elite (please see excellent youtube video from @amit151190 above). If the headwinds highlighted above are fair, then perhaps they may be able to pick up growth again. This is a clear amber flag.
The Economy / Popular segment is gyrating in a far more dramatic fashion: +25% in Q1 and -25% in Q2! This is something to understand better after the results are out / Q2 conference call. If I had to hypothesise, this could be related to the change in distribution approach. Since they appointed a third party distributor for Economy / Popular in Q1, they may have pushed extra volumes in that quarter and are normalising in Q2. The H1 FY25 growth for Economy / Popular is -3% – so this still looks challenging (perhaps exacerbated by the headwinds mentioned above?)
There could be a positive note on the financials for Q2 though – as the Elite / Premium contributed 80%, there should be a bump in margins? So the EPS growth may not be as flat. Still to be seen when results are out though.
In conclusion, several warning flags are flashing – but for me they are more amber than red at this stage – however, they do merit tracking. Numbers are not great – but probably not as bad as they may appear at first glance?
Anyone with alternate interpretations of the numbers?
Disc: Invested with a near full position so likely to be biased. Not a SEBI registered advisor and not investment advice
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