Murree Brewery (MUREB) is one of the alpha stocks we recommended in our Strategy Report 2025 dated Nov 16, 2024. Our Dec-2025 Target Price of Rs1,505/share offers a potential total return of 120% (incl. dividend yield of 10%). We expect the company to post sales and earnings to grow at a 3-year CAGR of 12% and 17% from FY25-FY27, respectively.
§ Over the last 10 years (FY15-FY24), MUREB’s net sales have increased at a CAGR of 16%. Similarly, the earnings have grown at a 10-year CAGR of 11%.
§ Our liking for MUREB mainly stems from (1) Revenue growth driven by price increases and volumetric growth/recovery from key liquor division, (2) margin sustainability due to operational developments and stability of raw material prices, (3) strong cash flow generation to support future payouts, (4) company is the largest player in an oligopolistic Alcohol market.
§ Revenue growth due to higher volumes and timely price increases:
In FY24, MUREB achieved 28% sales growth mainly due to price increases and volumetric growth in Non-Alcoholic Products, Pakistan-made foreign liquor (Liquor Division) and Mineral Water (Murree Sparklets). In FY24, the company increased its glass melting capacity by 16%, from 112 to 130 tons daily. MUREB also added a new bottled water filling and 2-litre juice lines. 42k cases capacity of non-alcoholic products will be added before the summer of 2025, meeting the rising demand for these products. These developments and the improvement in disposable incomes due to economic stability will lead to the company’s revenue increasing to Rs33.3bn by FY27 (CAGR: 12%). The government regulates the distribution and sales of alcoholic beverages; however, pricing is not regulated.
§ Improvement in margins due to operational efficiency and cost stability: In FY24, the company’s gross margins improved to 23.5% compared to 18.8% in FY23 and an average of 27.6% for the last ten years. In 1QFY25, gross margins have further improved to 27.0%. Improvement in margins has been due to stability in currency and falling raw material price, which includes barley, wheat and sugar. We expect margins to remain stable at 26-27% for FY25-FY27.
§ Strong balance sheet to support future payouts: MUREB is expected to generate EBITDA of Rs5.5/6.2/6.6bn in FY25/26/27, respectively. The company has a strong balance sheet and is mostly equity financed with a net cash position of Rs6.9bn as of September 2024. We believe that strong cash generation will allow the company to maintain a payout ratio of 60%.
Courtesy – Topline Pakistan Research
