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Sula Vineyards shares tumble nearly 7% after company’s Q4 profit declines

About Company

• Sula Vineyards Limited is India’s largest wine producer and seller as of March 31, 2022
• The company also distributes wines under a bouquet of popular brands including “RASA,” “Dindori”, “The source,” “Satori”, “Madera” & “Dia” with its flagship brand “Sula” being the “category creator” of wine in India.
• Market leader with close to 60%+ market share in premium wines
• India’s best-selling red, white, rosé & sparkling wines
• Winery capacity of 16.7 Mn liters, amongst the top 5 wineries in Asia
• Sourcing from 2,600+ acres of vineyards, significantly higher than the next two wine producers in India
• Sula’s Shiraz Cabernet – India’s largest selling wine by value
• One of the world’s most visited vineyards; ~435,000+ visitors

Products Offered

1. Red Wines:
   • Sula Rasa Shiraz: A premium red wine with rich, intense flavors.
   • Sula Dindori Reserve Shiraz: A full-bodied Shiraz with oak aging.
   • Sula Cabernet Sauvignon: A robust red wine with dark fruit notes.
   • Sula Merlot: A smooth, medium-bodied red wine.
2. White Wines:
   • Sula Sauvignon Blanc: A crisp and aromatic white wine.
   • Sula Chenin Blanc: A medium-bodied white with floral and fruity notes.
   • Sula Riesling: A fragrant and slightly sweet white wine.
   • Sula Dindori Reserve Viognier: A rich white wine with a creamy texture.
3. Rosé Wines:
   • Sula Zinfandel Rosé: A light and fruity rosé.
   • Sula Blush Zinfandel: A delicate and refreshing rosé wine.
4. Sparkling Wines:
   • Sula Brut: A sparkling wine made using the traditional method.
   • Sula Brut Rosé: A sparkling rosé wine.
   • Sula Seco: A medium-dry sparkling wine.
5. Dessert Wines:
   • Sula Late Harvest Chenin Blanc: A sweet dessert wine with honeyed notes.
6. Non-Alcoholic Offerings:
   • Sula Dia Red and White: Semi-sparkling non-alcoholic beverages.
   • Sula Sparkling Shiraz Grape Juice: A non-alcoholic sparkling grape juice.

Revenue Mix

Product wise Breakup

• Wine Business- 88.6%
• Wine Tourism- 6.8%
• Others -46%

Distribution Channel

• Off Trade- 72%
• On-Trade -23%
• Direct to Consumers -4%
• Others-1%

Brand Wise Breakup

• Premium Wine-48.4%
• Elite WIne-23.9%
• Popular WIne-16.2%
• Economy Wine- 11.5%

Key Ratios

Shareholding Pattern

Change In Shareholding Pattern

Promoters

• Change: -1.15% (from 27.33% to 26.18%)
• Analysis: A slight decrease in promoter shareholding suggests that promoters have sold or diluted their stake. This could be for various reasons, such as raising capital, financing business operations, or cashing out a portion of their holdings.

FIIs (Foreign Institutional Investors)

• Change: +6.43% (from 7.42% to 13.85%)
• Analysis: A significant increase in FII shareholding indicates greater interest from foreign investors. This could imply a favorable view of the company’s prospects, enhanced international visibility, or broader investment appeal.

DIIs (Domestic Institutional Investors)

• Change: +13.75% (from 8.86% to 22.61%)
• Analysis: The considerable increase in DII shareholding suggests that domestic institutions like mutual funds and insurance companies have boosted their investment in the company. This often reflects a positive outlook on the company’s performance and long-term growth prospects.

Public

• Change: -19.03% (from 56.39% to 37.36%)
• Analysis: A noticeable decrease in public shareholding indicates that a substantial portion of public shares has been absorbed by institutional investors or other stakeholders. This could be due to buybacks, large block trades, or shifts in investment preferences.

Financial Trend

Sales Analysis

• Trend: There was a noticeable decline in sales from 2019 (501) to 2020 (387), likely influenced by the start of the COVID-19 pandemic. This downward trend continued into 2021 (306). However, from 2021 onwards, sales showed a consistent recovery, reaching 548 by March 2024.
• Sales Recovery: The recovery trend from 2021 to 2024 could indicate a rebound from pandemic-related disruptions, suggesting that the business adapted or the market conditions improved.
• Sales Increase (2020 to 2024): The percentage increase in sales from 2020 (387) to 2024 (548) =$41.34\%$

Net Profit Analysis

• Trend: Net profit also experienced a dip, from a positive value in 2019 (20) to losses in 2020 (-8) and 2021 (-1). From 2022 onwards, there is a clear upward trend, with profits of 49, 88, and 95 in 2022, 2023, and 2024 respectively.
• Profit Recovery: The turnaround in net profit from losses in 2020 and 2021 to consistent gains from 2022 onwards suggests improved financial performance, possibly due to cost management or increased sales.
• Profit Increase (2020 to 2024): The percentage change in net profit from 2020 to 2024=$1287.5\%$

This massive change reflects the company’s significant recovery from loss to consistent profitability.

Company Valuation

Share Price

In Dec 2022, Since IPO Sula vineyards has given 49.98% returns (in 1.5 years)

Median PE vs Current PE

• Current PE- 44.3
• Median PE- 46.7
• Which shows that currently company is undervalued

What Investors Should Do ?

• Sula Vineyards has 60% market share in India so it will dominate the Indian Market
• Company launched in 2003 but in 2020 company has started to focus on the Direct to consumer market in India which will definitely grow in the future.
• Sales & Net Profits are consistently growing year on year.
• As the company is slightly undervalued so this is the right time to invest in the market.

Check Out this– Kotak Mahindra Bank Fundamental Analysis

Disclaimer

• This article is a complete guide about Sula Vineyards Ltd.
  
• These information and forecasts are based on our analysis, research, company fundamentals and history, experiences, and various technical analyses.
• Also, We have talked in detail about the share’s future prospects and growth potential.
• Hopefully, this information will help you in your further investment.
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