So investor Dolly Khanna has exited the stock. Wonder why, when fundamentals are decent!
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He might sense better opportunity elsewhere
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Guys, I am sure this has been highlighted before but just have a look at the related party transactions (RPT) for the past three years. It seems to be a very large percentage of the Net profits. Mr. Tushar (Director) on the other hand is receiving a small portion of the profits (24.912 lakhs). Please find the table below for your reference.
I emailed the company but unfortunately got no response. Could somebody find this out?
The money should be used for reinvesting or Shareholder dividends. Its a bit concerning.
|Year |2016|2017|2018|
|Net profits (Cr) |14.29|16.91|25.19|
|RPT with KMP (Cr) | 6.11| 7.5| 9.46|
|RPT as % of Net profit | 43%| 44%| 38%|
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I was evaluating an entry after recent downturn and the thread has been educating.
The company has been highlighting capacity expansion, moving up the value chain and expanding footprint as key drivers for growth.
The plan of greenfield expansion from 31 to 45 mn alcohol production capacity was slated for 2018 however could not find any updates on this. Would the forum members tracking the stock have any information in this regard?
Also have a query, noticed all liquor stocks,in general ,have taken a dip in since Q4 2018. Is there any negative correlation with election or are there any other factors operating here?
Just to add to discussion, Dolly Khanna has reposed his faith in the stock, (reentered in Dec 18) however seems he is banking on the entire sector as a whole (also invested in IFB Agro and Som Distilleries).
Analysis of Associated Alcohol and Breweries Limited
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After reading Dr Vijay Malik sir analysis report…Associated Alcohol seems like a fraud company.
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AR 19 notes
Alcohol sector facing unforeseen challenges
Increasing tax incidences
Significant change in input costs
Increased competition from international players
Geographical presence in 5 states , derives 95 % revenues from Madhya Pradesh, Karnataka & Kerala.
Company’s products include - Premium extra neutral alcohol/ grain spirit ; Indian Made Indian Liquor (IMIL) ; Indian Made Foreign Liquor (IMFL) ;Rectified spirit ; Contract manufacturing partner (Diageo – USL)
Company’s manufacturing facility is located at Khodigram Barwaha District, Khargone, Madhya Pradesh which is responsible for alcohol production, bottling and packaging of liquor.
Company is expanding its ENA capacity to 45 million litres to 90 million litres by 2021. ( cost of project -120 cr)
Clients of company include - Diageo/ United Spirits Limited ; Government-regulated retail contractors/agencies (Both IMFL and IMIL) ;Karnataka State Beverages Corporation Limited ; Kerala State Beverages (M&M) Corporation ; Chhattisgarh State Beverages Corporation
CARE reaffirmed the A-/A2 rating on the Company for bank borrowings.
45 % of revenues from IMIL ( Indian made Indian liquor ) hence it is not possible to pass on increase in prices to final comusmer as realization are fixed by government.
IMFL segment having lot of competition hence not possible to pass on increase in RM prices to end consumer
RM prices increased greatly during the year causing a dip in margins for the company.
Company plans to increase the number of proprietary brands ( IMFL brands)
Company has power plant meeting 60 % of its requirement on its way to making that 100 %.
Company is recycling 60 % of its water used in manufacturing , on its way to make that 100 %.
Stabilised ENA capacity expansion and achieved 100% capacity utilisation
Strong growth reported in the newly entered Kerala market
Proprietary brand offtake increased 25%
Proprietary brand share in the total revenues increased to 12% from 6% in FY18
Share of franchisee brands accounted for 18% of the revenues against 14% in FY18
Revenue increase to 411 cr vs 330 cr ( 24 % yoy)
EBITDA increase to 61.8 cr vs 54.58 cr ( 13 % yoy)
PAT increase to 30.26 cr vs 25 cr ( 20 % yoy)
Remuneration of KMP has come down from 9.46 cr to 4.76 cr ; even at 4.76 cr its it 15 % of PAT.
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Q2 FY20 Results-
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AS majority of revenue coming from MP: MP eyes liquor for higher revenue
Under the new order, existing liquor shop owners, after paying licence fee, can open a sub-shop five kilometres away in urban areas and 10 kilometres away in rural areas. The increased density of liquor vends will ensure tipplers don’'t have to travel long to access their drink. The Kamal Nath government expects to raise Rs 13,000 crore through alcohol sales.
Any info on the conference call with Abakus Capital?
Attached in my analysis of AABL. Seniors in the Forum please suggest any improvements in the Analysis.
Overall, Alcohol is a sin Industry and will exist for long time.
AABL has grown well in the past
AABL has some red flags w.r.t. Management in the past (But rectification seems to be happening). Also Country liquor which is a very regulated business and good amount of Government Intervention. The company is trying to expand to different states and also into Franchises and has good understanding of the Industry.
DISC: I will put the company in my Watchlist for the time being
AssociatedAlcohol-Analysis.pdf (960.0 KB)
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Really good analysis especially on the Porter’s 5 Forces section. This was something I was looking for to better understand the industry.
I see you’ve also used the Safal Niveshak template 
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Stock price has been very volatile but PAT and top line are consistently going up since past 7-8 years. Company has successfully completed 50% capacity expansion of ENA and turnover for March 2020 has increased accordingly. It seems time for rerating is around the corner. It appears great on all parameters like ROCE, ROA,ROE. Valuation wise it is cheapest in the sector at the moment and is almost debt free. Promoters holding is 58% and it has no pledge shares. Company in annual report 2020 has stated that it is considering another 100% capacity expansion of ENA capacity at cost of Rs 120 crore. March 2020 EPS stands at 27 Rs per share. Current market is 260 Rs per share. It seems like a no-brainer at current price. Risk reward seems to be favourable.
Request views of other members on the stock.
Disclosure : Invested since 2017 and added more recently.
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Did anyone attend AGM and throw some light on latest happenings please?
I was not able to login into site at last minute 
Hey guys! Just leaving my conclusion from my analysis here. I’ve valued the company between Rs. 420-550 per share. Pretty optimistic, I know.
"AABL has grown revenue in 8 out of its previous 10 FYs and at an average rate of 19%. This can be strongly attributed to the strong drivers of the industry which are intact and expected to stay that way for a long time barring regulatory issues. The key drivers include:
- Population and age: India with a population of more than 1.37 bn people is the second largest in the world has one of the youngest populations
- Urbanization: Growing urbanization is introducing a larger consumer group, mainly young men and women, to alcoholic beverages and has resulted in more consumers willing to try new products.
- Growing income: India’s per capita income has doubled in the past decade and with growing income and increasing acceptance of alcoholic beverage consumption, the market will continue to grow.
- Rural consumption: There has been steady rise in the rural consumption of alcohol owing to growing rural prosperity in the past few years.
- Increased acceptance as a social beverage
- Premiumization: Indian consumers increasingly prefer consumption of premium brands in the alcoholic beverage space. The growth of the premium brands remained largely unaffected despite there a slowdown in the economy.
- Per capita consumption: India ranks 101 in terms of per capita alcoholic beverages consumption in the world which creates a large gap to bridge
- Home deliveries: Keeping in mind the pandemic situation, a number of states allowed the home delivery of alco-beverage products. This is expected to drive the industry in the coming years.
Management going in for rapid expansion over recent years gives further confidence over the demand outlook. Additionally management’s strong focus on Working Capital is also advantageous to generating free cash flows.
The main couple of threats to the industry are prohibition and higher taxes owing to the Coronavirus pandemic. The loss of its key contracts with UBL could also impact the Company adversely. Over the long-term the rise in awareness of health consequences of alcohol could lead to a structural slowdown as seen in developed countries.
The performance of the Company on both the top and bottom line has beaten the FMCG sector (however with much higher standard deviation) with Return ratios nearing the same level as companies like Dabur and Godrej Consumer. AABL also seems grossly underpriced in comparison to companies within its own industry despite the improving product mix, the potential to push its proprietary brands using the cash from its ENA business and growth track record.
Overall this is a Company that’s well placed among its peers with a great track record and vast opportunity lying ahead of it, mainly driven by the industry and market potential. Additionally the Company is currently trading at a very good valuation."
Do reach out to me if you want the full report and my model. Don’t worry, it’s absolutely free. Just trying to share information, my assumptions, learn and get better insights.
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What was this contract? May be I am unaware about the contract with UBL…
I’m assuming there’s some sort of contract since the Company supplies its ENA to UBL for use in its spirits.
purpose of this forum is to share … will be resourceful once shared here …
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Kindly share the report.
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Well some news on AABL.
ITI MF has purchased 36,475 shares in the company in month of August 2020.
Radico Khaitan has risen approx 15% this week. Globus spirits also risen more than 50% since it declared results on 24.08.2020. UBL had rallied 15% early september and has been consolidating/some profit booking has happen since then.
All I want to convey is as the other stocks in sectors are gaining momentum and Mutual fund has picked up shares in AABL. It might be time stock starts to move.
I request RoyD to share the report so that myself and other members can make use of the same.