GM Breweries

Basis of our Recommendation

GM Breweries has demonstrated strong operating performance, particularly in the country liquor segment, with EBITDA margins exceeding 23% for four consecutive quarters. However, management anticipates margin normalization in H2 FY27 due to rising input costs, particularly from the new sugarcane crushing cycle and elevated packaging expenses. The company's strategic expansion into Maharashtra's interior districts and operational efficiencies, such as adopting PET bottles, are expected to support revenue growth and market share. Despite a stable balance sheet and reasonable valuations at 13x FY28E earnings, the company faces headwinds from illicit liquor competition and regulatory uncertainties. Vista's forecast reflects a moderate revenue growth outlook, with margins under pressure, aligning with the broader industry trends of rising costs and improving pricing power. The anticipated regulatory changes in Karnataka may provide a potential boost, but the overall environment remains challenging. Over the next 12-24 months, GM Breweries must navigate these pressures while capitalizing on its operational strengths to maintain its competitive position