Post QIP of Rs 5b, Manpasand Beverages’ (MANB) plan to double capacity from 177,500cpd to 377,500cpd is largely on track. The company has already finalised land for three work-in-progress plants at Vadodara, Varanasi and Sri City (South). Each of them is expected to contribute capacity of 50,000 cases per day (cpd). The Vadodara plant is expected to be commissioned in QvFY18, while the Varanasi and Sri City plants are scheduled for commissioning in Q1FY19.
The fourth plant planned to be set up in Jharkhand/ Orissa to cater to the north-east region is expected to be delayed (by one year to Q4FY19/1QFY20) with land not yet finalised. Our channel checks suggest that growth in Fruits Up remains strong, driven by the company’s focus on advertisement/promotion and the launch of Fruits Up mini pack (160 ml) in the carbonates category at an attractive price point of Rs 10/bottle.
The company focuses on advertisement through print/ television, and is also active on various social media platforms. Fruits Up contributed 23% of revenue in Q3FY17 (v/s 20% in the year-ago period), with the share expected to increase further to ~30% by FY19.
Focusing on the health agenda, the company is planning to launch a drink based on a mix of vegetables and fruits in FY18. Post adverse impact of demonetisation in 3QFY17, MANB is expected to bounce back sharply, aided by the addition of new capacities at the Ambala facility. Our channel checks suggest that demand at the onset of summer is very encouraging, with most dealers facing stockouts.
In our view, MANB continues to operate at full utilisation to cater to growing demand. We believe strong summer, along with the focus on advertisement, will drive superior performance at MANB. Demand continues to be strong in the fruit drinks category. However, on account of capacity delay of the fourth plant, we cut earnings estimates by 19% for FY19. The company’s presence in low-ASP/SKU products, addition of new capacities and foray into newer geographies provide comfort. Thus, we expect a robust revenue and PAT CAGR of 45% and 52%, respectively, over FY16-19E. We value the stock at a P/E of 27x FY19E EPS, with a target price of `841 (20% upside).