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BQEdge | Why You Should Keep An Eye on Marico, Nestle And GM Breweries Today

BQEdge is specially curated for BQBlue subscribers. Every day this note will offer special equity market and stock-specific insights and flag select emerging trends in the tricky-to-trade derivatives market.

On Today’s Edition

  • Why you should keep an eye on health and beauty products maker Marico.
  • Nestle’s chart suggests an interesting trend emerging for the Maggi noodles maker.
  • Will GM Breweries stock price see a correction?

Marico: Rally Time Or Time Out?

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Nestle's Charts Show A Spring In Its Step

GM Breweries Stock Price May See A Correction

Country liquor maker GM Breweries reported weak third-quarter earnings with topline growth of 5.7 percent over last year, while profit dropped over 25 percent.

Margin came in at 20.4 percent, the lowest since the fourth quarter of FY17, as raw material costs surged.

Raw material costs as a percentage of revenue (post excise) stood at 71 percent compared to 64 percent last year. While the company saw an 8 percent quarter-on-quarter revenue growth, the raw material costs surged 20 percent.

Rectified spirit, as well as packing materials, are the key raw materials used by the brewery. As per Bloomberg, rectified spirit prices are currently trading at a four-year high.

The company management, in the annual report highlighted that the high level of fluctuations in the prices of rectified spirit, as well as an acute shortage in the availability, are the constraints faced by the company during the past several years.

Earnings Snapshot (YoY)

  • Revenues (post excise) up 6 percent at Rs 125 crore
  • Net profit down 25 percent at Rs 16.7 crore
  • EBITDA down 26 percent at Rs 25.5 crore
  • Margin at 20.4 percent versus 29.1 percent

The weak performance in the third-quarter has led to earnings per share contraction of the company. The nine-month EPS now stands at Rs 31.91 per share versus earlier Rs 32.99.

While the stock price is down 6 percent on a one-year basis, the returns for investors is higher by 40 percent from the October lows.

To be sure, the company's PAT grew at a CAGR of 59.6 percent during FY15 to FY18. In this span, the stock moved up over 10x from Rs 74 to Rs 769 as of March 31, 2018. With the performance faltering, especially on the margin and the profit front, there might be a corrective move one can see in the stock today.

Year-Ahead