Monarch Networth Capital sees 42% upside in Sula Vineyards stock on strong brand recall, market leadership

Sula is launching new initiatives, such as canned wine and ongoing premiumisation. These trends can catapult it to the next level, says the brokerage.

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Sula Vineyards shares jumped 2.5 percent in trade on March 21 after Monarch Networth Capital initiated coverage on the winemaker with a buy call, based on the firm’s market share, brand recognition and competitive advantage.

The domestic brokerage indicated an upside of 42 percent, with a price target of Rs 740 per share.

“Leveraging unique initiatives such as Sula Fest and wine tour experience, the company has played a pivotal role in cultivating and building the wine culture in India,” said Monarch Networth Capital.

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With substantive entry barriers, like in sourcing raw materials and challenges of shifting government regulations, Sula is well-positioned to maintain its market leadership, it added.

At 1.05 pm on March 21, shares of Sula were trading Rs 532 apiece on the NSE, higher by 2.12 percent.

The wine industry will see significant growth, as a result of shifting demographics. Additionally, Sula is launching new initiatives, such as canned wine and ongoing premiumisation. These trends can catapult it to the next level, as per the brokerage.

The winemaker has over 50 percent market share in India. “It leverages substantial vineyard investments and farmer contracts across 2,800 acres, creating formidable barriers to entry. In view of barriers like high import duties, Sula’s strategic land holdings and contracts with over 500
farmers ensure operational stability and cost predictability,” added the brokerage.

Sula is expected to deliver revenue growth of 17 percent CAGR during FY23-FY27E, primarily fueled by the elite and premium wine segments. Also, the brokerage is projecting a ~19 percent CAGR in EBITDA over the same period, with margins forecast to improve by 240 bps.

Over the past six months, shares of Sula have gained around 12 percent. The frontline index Nifty 50 has risen around 11.5 percent during the same period.

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