Sula Vineyards stock may rally 60% to Rs 573 post listing in bull case scenario, says Ventura

Sula Vineyards, whose Rs 960.35-crore IPO is underway, could rally 60 per cent post listing in a bull case scenario said Ventura Securities in its latest IPO note. In a bear case however, it sees a 44 per cent potential downside over the upper end of the price band. Ventura’s base case price target of Rs 411 suggests a 15 per cent potential upside. 

Ventura said that a strong sector outlook is expected to drive financial performance for Sula. At the upper end of the price band (Rs 357 (upper price band), Sula is valued at FY25 PE of 26.1 times, which is significantly lower than the FY25 valuations of United Spirits (45.9 times) and United Breweries (45.6 times), it said.

Sula Vineyards is the market leader across all four price segments (Elite, premium, economy and popular) and also the market leader across all the wine variants namely red, white and sparkling wines.  Sula’s business is broadly classified under two categories. The first is wine production, the import of wines and spirits, and the distribution of wines and spirits. Besides, it is engaged in sale of services from ownership and operation of wine tourism venues, including vineyard resorts and tasting rooms.

Ventura is expecting Sula to benefit from the rising consumption of wines in India. In its base case scenario, Ventura pegs revenues to grow at a CAGR of 29.8 per cent to Rs 765 crore in FY25. This will include a 19.8 per cent CAGR growth in the wine business revenue to Rs 716 crore.

Revenues of own brands are expected to grow 19.9 per cent CAGR at Rs 657 crore.  This will include 20.1 per cent CAGR growth in elite & premium wine revenues at Rs 466 crore on 14.8 per cent CAGR growth in volumes at 6 million litres and 4.6 per cent CAGR growth in average selling price (ASP) at Rs 773 per litre.

“Ebitda and net profit are expected to grow at a CAGR of 36.8 per cent and 48.9 per cent to Rs 212 crore and Rs 115 crore, respectively. Ebitda and net margins are expected to improve by 276 bps to 27.7 per cent and 362 bps to 15.1 per cent, respectively,” it said.

On its Day 1, the IPO had received bids for 15,73,152 shares in the first 90 minutes of the bidding process, which was 8 per cent of the total issue size of 1,88,30,372 shares.

Also Read: Sula Vineyards IPO opens today: GMP, analyst views, price band, allotment, listing date & more