CNBC-TV18's stocks editor, Udayan Mukherjee - Empee came in with a fairly interesting price point because compared to some of their peers. Even if you do not compare it with the United Spirits it looked quite inexpensive. They are strong regional players in the liquor business, they have got very well established brands in Tamil Nadu and Kerala. The Old Secret Rum and the Nepolean Brandy are fairly well established brands in that part of the world.
Low-end market but even so established player. And if you compare it I do not think comparisons with United Spirits are fair but if you compare this with a Radico Khaitan I think you will get a sense that this stock would actually trade much higher because if you just compare apples to apples expected listing price today is about Rs 450-460 or thereabouts. At that price this one gets a market cap of about Rs 800 crore. It will do probably sales of Rs 1600 crore in FY09.
On Rs 1600 crore sales Empee if it lists at around Rs 450-460 will get a marketcap of about Rs 800 crore and would be trading at something like 6-6.5 times FY09 earnings. Compare that with Radico Khaitan it would have Rs 1,000 crore of sales less than Empee in 2009, it already gets Rs 1500 crore marketcap, which is double of what Empee will probably get on listing day. Similar margin profile 12% operating margin for each so there is no great difference, all regional brands nothing great rationale about Radico Khaitan either. 23 P/E on FY09 while this company gets 6 P/E.
I think the listing may not be spectacular but if the market remains fairly gung ho. I cannot think why Empee should not go up to something like more than Rs 600 because at Rs 600 it would be trading at 9 P/E. It would still have a marketcap of something like Rs 1200 crore which would still be at a discount to Radico Khaitan despite having 50% higher sales expected next year with similar margin profile.
I think more than Rs 600 is fair value for Empee but that does not mean that is where it will list today. I think listing will still be close to Rs 450-460 maybe a little bit higher. There you could see some HNI profit takings so I do not know about day one, day two. But if it is doing peer comparisons and ascribing fair value then I think if Radico Khaitan is where it is and deserves to be where it is and United Spirits is where it deserves to be then I think this stock should be more than Rs 600 easy.
BigGains !!
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