Som Distilleries & Breweries: A Closer Look at Recent Downgrade and Positive Performance

Som Distilleries & Breweries, a smallcap company in the breweries industry, has recently been downgraded to a 'Sell' by MarketsMOJO on April 15, 2024. This decision was based on several factors, including weak long-term fundamental strength with an average Return on Capital Employed (ROCE) of 6.50%, poor long-term growth with an annual operating profit growth rate of only 8.50% over the last 5 years, and a high Debt to EBITDA ratio of 4.82 times, indicating a low ability to service debt.
However, the company did declare very positive results in December 2023 with a growth in net sales of 79.34% and has consistently declared positive results for the last 8 quarters. In addition, its ROCE for the half-year period was at its highest at 15.92%. The technical trend for the stock is currently sideways, indicating no clear price momentum, and has generated a -4.18% return since the downgrade on April 15, 2024.

Despite the downgrade, Som Distilleries & Breweries has a very attractive valuation with a ROCE of 15.6 and a 3.7 Enterprise value to Capital Employed. The stock is also trading at a discount compared to its average historical valuations. Over the past year, the stock has generated a return of 97.94%, while its profits have risen by 62.1%, resulting in a PEG ratio of 0.5.

Furthermore, there has been a rise in promoter confidence as they have increased their stake in the company by 0.53% over the previous quarter and currently hold 35.26% of the company. This is a positive sign of high confidence in the future of the business. Additionally, Som Distilleries & Breweries has consistently outperformed the BSE 500 index in each of the last 3 annual periods, generating consistent returns for its investors.

In conclusion, while the recent downgrade may raise concerns, Som Distilleries & Breweries has shown strong performance in terms of net sales and profits, attractive valuations, and rising promoter confidence. Investors should carefully consider these factors before making any decisions regarding their investment in the company.