Target: ₹1,599

CMP: ₹857.40

The business of Globus Spirits or GSL can be divided into three segments, namely extra neutral alcohol or ENA (Incl. ethanol), IMIL (Indian Made Indian Liquor) and IMFL (Indian Made Foreign Liquor), with the ethanol and IMIL segments mainly contributing to the topline and bottomline. The IMFL segment has a negative contribution to the bottomline.

Raw material and power costs have normalised, there is a healthy increase in IMIL selling prices, and the spreads are back on the table with the EBITDA margins of ethanol/ENA & IMIL moving towards 10 per cent and 20 per cent, respectively.

Negative contribution from the IMFL segment is expected to turn positive from FY28F.

We retain our Add rating on with a higher target price of ₹1,599 (15x FY26F EPS) from ₹1,562 earlier.

Downside risks: Broken rice and maize is mainly used to make ENA/ethanol and any rise in its price will directly impact the gross profit; final product prices are decided by state/central governments and/or oil marketing companies and hence, profitability depends on the prices fixed by them; and Power, a vital component of product economics, is generated mainly from coal and thus, any adverse movement in coal prices will hit GSL adversely.