Mukul Agrawal-Backed Small Cap Stock Surges 17% To All-Time High After Brokerage Upgrade

Sula Vineyards‘ share price was gaining momentum on Friday going up over 17% to hit an all-time high of ₹649.95.

What Happened: The massive surge today comes as CLSA upgraded the stock’s rating and price target. The global brokerage upgraded Sula Vineyards’ stock from “outperform” to “buy” and raised its price target to ₹863 from the earlier target of ₹571. The revised target reflects a 55% upside from the stock’s last closing price of ₹554.40.

CLSA’s upgrade for Sula Vineyards comes on the heels of the Maharashtra government’s decision to revive the Wine Industrial Promotion Scheme (WIPS) for five years. Under this scheme, wineries are subjected to a 20% Value Added Tax (VAT), of which 16% is refunded as a rebate. The state cabinet has also approved the refund of this rebate for four years starting from the financial year 2021.

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Maharashtra is a crucial market for Sula, as it is based in Nashik, and the state contributes nearly half of the company’s revenue and 45-50% of its volumes, as highlighted by CLSA. The revival of the WIPS removes a major distraction for investors, allowing them to shift their focus to long-term opportunities in wine consumption and wine tourism in India, the brokerage firm added.

CLSA emphasized the potential for growth in wine consumption, projecting a compound annual growth rate (CAGR) of 15% over the next 10 years. With a rising middle class, rapid growth of restaurants, and increasing incomes, Sula, with a market share exceeding 50%, is positioned as the biggest beneficiary and a market leader in this growth trajectory, the brokerage said in its note.

Additionally, CLSA noted that Sula is a leader in wine tourism, a revenue driver that generates interest in wines, especially in a country where advertising alcoholic beverages is restricted. The company plans to expand its tourism offerings beyond Maharashtra. As of September 30, Mukul Agrawal owned a 2.37% stake in the company worth around ₹128 crore.

Price Action: Sula Vineyards' share price was up 14.90 % to trade at ₹637 in the early hours of trading on Monday.

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Posted In: Analyst ColorEquitiesGovernmentRegulationsUpgradesPrice TargetMarketsAnalyst RatingsMoversTrading IdeasMukul AgrawalSula Vineyards

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