Sula Vineyards stock tumbles over 8% to 18-month low on weak Q2 earnings, nears IPO price

Stock Market Today: Shares of Sula Vineyards, India's largest wine producer, declined 8.13% to ₹382 during the trading session on Wednesday, November 13, following concerns over the company's September-ending quarterly performance. This dip has brought the stock close to its lowest level since April 2023.

On Tuesday, Sula Vineyards reported a 37.3% drop in consolidated net profit for Q2FY25, down to ₹14.5 crore from ₹23.1 crore in the same period last year. The decrease in profit was largely due to a slowdown in revenue from the Own Brands segment and an increase in finance costs.

Revenue from operations fell slightly by 1.2% YoY to ₹142 crore, down from ₹143.7 crore. Revenue from the Own Brands segment, which constitutes 90% of the company’s revenue, showed a marginal 0.4% YoY increase to ₹127.2 crore, affected by a temporary slowdown in urban consumer demand.

The segment’s performance was further impacted by temporary disruptions in Karnataka due to excise policy changes and in Delhi due to an excise portal shutdown in the second half of September 2024.

The revenue from the Own Brands segment ex-Maharashtra (its biggest market) and Karnataka grew 6% YoY. Telangana, Madhya Pradesh, West Bengal, Himachal, and Chandigarh, among others, performed robustly with high double-digit growth, as per the company's Q2FY25 earnings filing.

Its gross profit remained flat YoY at ₹104.4 crore, supported by improved gross margins from a favourable product mix. However, EBITDA declined by 23.85% YoY to ₹34.4 crore, mainly due to higher sales, distribution, and marketing expenses.

Finance costs rose by 16% YoY due to an increase in debt, which stood at ₹330 crore as of September 2024, compared to ₹260 crore the previous year.

Looking ahead, the company is cautious about the soft consumer environment and the potential impact of the Maharashtra elections in November 2024. However, it remains cautiously optimistic for the second half of FY25.

Sula anticipates demand to improve, supported by structural tailwinds, including the reopening of Andhra Pradesh after a five-year hiatus, the launch of four new brands in CSD, the resumption of shipments to the Border Security Force (BSF), and the return of the popular SulaFest.

Stock down 44% from record highs

Since reaching an all-time high of ₹699 per share in January 2024, the stock has been on a steady decline, closing each month in the red and now trading 44% below its peak level. 

The stock debuted on Indian exchanges in December 2022 at ₹331 per share. With an IPO price of ₹357 per share, the stock is currently 10% away from returning to this level.

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