Alcoholic & Beverages

Deciphering the Alcoholic Beverages Sector

When we talk about alcoholic beverages sector in our country, the stock which comes to our mind as the undisputed leader in this sector is a stock called as United Spirits Limited (MCDOWELL-N).

Currently the stock is trading at Rs 530. Before initiating a bullish trade in this stock, let’s try to understand the technical as well as fundamental analysis of this stock.

Technical analysis-If you see carefully the stock has remained sideways since a very long time. It has been in a range of Rs 500 to Rs 800 since last 7 years. So basically, the stock gives an opportunity for smart investors to enter at lower levels and exit at higher levels later. Of course, the stock made a low of Rs 450 odd in March 2020 but that low was created due to COVID crash which our country had witnessed. Even the best stocks of the country fell heavily in that period. But MCDOWELL-N has started recovering now and it looks like it might not test the low of 450 odd again. So technically the stock is at a good setup as of now.

Fundamental analysis-The stock is the undisputed market leader with a market capitalization of more than Rs 38,000 crores. The sales of this company have been consistent since last many quarters (2000 crores and plus). The OPM of the stock has been maintained well in the range of 15- 20%. The stock had a debt of more than 7000 crores since the year 2009 but since 2015 the debt has gradually come down and recently after the announcement of September 2020 results, the debt figure has come down to just 1000 crores. So, this gives us a signal that the stock is on the path to become debt free very soon.56% of the shareholding of this company is with Relay B V (DIAGEO) who is the world leader in alcoholic beverages having brands like Johnnie Walker, etc under it. FIIs, DIIs and other big payers hold 30% of the shares of the company. Only 14% is held with the retailers giving us a signal that the stock is in the safe hands of big people. So based on this analysis I would like to initiate a positional bullish trade in this stock with a target of Rs 800 and above in the coming few months.

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