Short term and long term pick : Associated Alcohols & Breweries Ltd

Stock Name: Associated Alcohols & Breweries Ltd

Company History:

Associated Alcohols & Breweries Ltd. is one of the largest distilleries in India and the flagship company of the Associated Kedia Group – a Rs. 1000 million liquor conglomerate with interests in liquor manufacturing and bottling.

The company was set up by its founder Chairman — the Late Bhagwati Prasad Kedia. Incorporated in 1989, AABL took over the existing distillery of the promoter group in 1990 and expanded activities into manufacturing of highest grade liquors.

Extra Neutral Alcohol is a vital ingredient in the making of an alcoholic beverage. AABL supplies this vital ingredient to many leading manufacturers under a special agreement. In the IMFL segment, the company has an understanding with reputed companies like Diageo (owner of brands like Smirnoff vodka and Johnnie Walker Scotch Whisky), Mason & Summers and Diageo-Radico. These companies buy a total of 55-60% of the total IMFL produced by AABL. The balance production is used for direct supplies to the branded suppliers across the country, apart from manufacturing its own branded products.

In house brands manufactured and marketed by AABL include consumer favourites such as Red & White, James McGill, Bombay Special (in the whisky segment).

Fundamental Analysis:

1. Emphasizing growth on sustainable manner rather than aggressive plans
2. Talking a lot about ethics and increased its product cost, still no dent in company profit.
3. Its manufacturing 3 Cr litre alchol per year currently, 2021 target to manufacture 7 cr litre alcohol
4. Penetrating international cum pan india , revenue increased in both segments comparatively to previous year.
5. Sales growth for 12 years is CAGR 12.31%
6. Debt to equity: 0.32
7. Sales growth 5Years: 16.46%
8. Promoter holding: 58.45%
9. Interest Coverage: Rs 9.43
10. Profit growth 5 Years: 46.34%
11. Return on equity: 19.40%
12. ROCE 3yr avg: 23.12%
13. Pledged percentage: 0.00%
14. Sales growth: 2.12%
15. Sales growth 3 Years: 11.62%
16. Profit growth 3 Years: 43.83%
17. Profit growth: 9.97%
18. Average return on capital employed 3 Years: 23.12%
19. Return on capital employed: 25.77%
20. Average return on capital employed 5Years: 18.57%

Conclusion:

Short term - Holding Period: 1 year - Return: 40%

If you look at the stock price of this company on June 2014 it is around Rs 21.00 now it is trading around Rs 160.00. (Refer Picture 1)

Already proved that is a 8x Multibagger. (Refer Picture 2)

One can BUY at around Rs 140 - 160 and keep STOP LOSS at Rs 125 and TARGET at Rs 225.

Long term - Holding Period: 5 years - Return: Minimum 200–300%