G M Breweries Q3 FY26: Strong Quarter Lifts Margins, But Valuation Concerns Persist

The December quarter results underscore a remarkable turnaround in operational efficiency, with the company achieving its highest-ever quarterly operating margin of 26.01%, up from 18.05% in the corresponding quarter last year. This 798 basis points margin expansion reflects improved product mix, better realisation, and operational leverage kicking in as the company scales production. The beverage manufacturer's ability to convert top-line growth into bottom-line expansion has been particularly impressive, with PAT margins expanding by 758 basis points year-on-year to 20.78%.

Financial Performance: Accelerating Momentum Across All Parameters

G M Breweries' Q3 FY26 performance represents a significant inflection point in the company's financial trajectory. Net sales reached ₹202.14 crores, marking the highest quarterly revenue in the company's history and reflecting 21.89% year-on-year growth alongside 11.98% sequential expansion. This sustained revenue momentum across consecutive quarters demonstrates strong underlying demand for the company's alcoholic beverage portfolio, particularly in the country liquor and Indian Made Foreign Liquor segments where G M Breweries commands a dominant market position in Maharashtra.

The company's profitability metrics have shown remarkable improvement. Operating profit before depreciation, interest, tax, and other income (PBDIT excluding OI) surged to ₹52.58 crores in Q3 FY26, representing a 75.70% year-on-year increase and 17.34% sequential growth. The corresponding operating margin of 26.01% marks the highest quarterly margin achieved by the company, reflecting superior operational execution and pricing power. This margin expansion has been consistent, with the company reporting progressive improvement from 18.05% in December 2024 to 18.97% in June 2025, 24.82% in September 2025, and now 26.01% in December 2025.

The quality of earnings remains robust, with the company maintaining disciplined cost management despite inflationary pressures. Employee costs remained well-contained at ₹3.51 crores in Q3 FY26, representing just 1.74% of net sales. The tax rate of 25.16% in the quarter aligns with normalised corporate tax rates, indicating sustainable profitability without the distortion of one-time tax benefits. Net profit after tax of ₹42.01 crores translates to a PAT margin of 20.78%, demonstrating the company's ability to protect bottom-line profitability even as it invests in growth initiatives.

Operational Excellence: Margin Expansion Reflects Pricing Power and Efficiency Gains

The standout feature of G M Breweries' Q3 performance has been the sustained margin expansion across both operating and net profit levels. The company's operating margin (excluding other income) improved from 18.05% in December 2024 to 26.01% in December 2025, representing a remarkable 796 basis points expansion. This improvement reflects a combination of factors: better product mix with higher contribution from premium IMFL brands, improved realisation per case, operational efficiencies from enhanced capacity utilisation, and favourable raw material cost trends.

The company's return on equity (ROE) of 16.39% on an average basis positions it favourably within the beverages sector, indicating efficient capital allocation and strong profitability relative to shareholder equity. Higher ROE demonstrates that G M Breweries generates superior returns on the capital employed, a critical metric for assessing management quality and long-term value creation potential. The company's return on capital employed (ROCE) of 15.15% further validates this operational efficiency, particularly impressive given the company operates with virtually zero debt.

The balance sheet quality remains exemplary, with shareholder funds expanding to ₹938.56 crores as of March 2025 from ₹822.32 crores in the previous year, driven by retained earnings. The company's investment portfolio of ₹830.71 crores as of March 2025 provides a substantial cushion and reflects prudent treasury management. Current assets of ₹180.22 crores comfortably exceed current liabilities of ₹157.49 crores, ensuring adequate working capital for operations. The company's ability to generate consistent cash flows from operations—₹161 crores in FY25—demonstrates the self-sustaining nature of the business model.

Nine-Month Performance: Strong First Three Quarters Set Positive Tone for Full Year

On a nine-month basis for FY26 (April-December 2025), G M Breweries has delivered exceptional performance across all financial parameters. Net sales for the nine-month period reached ₹545.52 crores, representing robust growth momentum. The company posted cumulative net profit of ₹102.76 crores for the first three quarters of FY26, demonstrating strong profitability across the period. This nine-month performance significantly exceeds the company's typical run-rate and positions FY26 for potential record full-year results.

The consistent quarter-on-quarter improvement in both revenue and margins through the first three quarters of FY26 suggests the company has successfully navigated seasonal variations and maintained operational momentum. The progressive margin expansion from 18.97% in Q1 to 24.82% in Q2 and 26.01% in Q3 indicates improving operational leverage and pricing power rather than one-time benefits. This sustained trajectory provides confidence in the durability of the company's competitive positioning and execution capabilities.

Industry Context: Navigating Maharashtra's Evolving Alcoholic Beverage Landscape

G M Breweries operates in Maharashtra's alcoholic beverage market, where it holds the distinction of being the largest manufacturer of country liquor with a sizeable market share. The company's portfolio spans both country liquor and Indian Made Foreign Liquor (IMFL) segments, providing diversification across price points and consumer segments. The Maharashtra market has witnessed steady growth in alcoholic beverage consumption, driven by urbanisation, rising disposable incomes, and gradual premiumisation trends as consumers trade up from country liquor to IMFL brands.

The regulatory environment in Maharashtra has generally been supportive of established players, with license barriers creating natural moats for incumbents like G M Breweries. The state's excise policies and pricing frameworks have allowed manufacturers to pass through input cost increases whilst maintaining volume growth. However, the industry faces periodic regulatory changes, taxation adjustments, and evolving social attitudes toward alcohol consumption that require careful navigation. G M Breweries' dominant position in the country liquor segment and growing presence in IMFL provides resilience against these challenges.

Peer Comparison: Attractive Valuation Relative to Industry Peers

When benchmarked against industry peers in the beverages sector, G M Breweries presents a compelling valuation proposition despite recent stock price appreciation. The company trades at a P/E ratio of 19.91x, significantly below the sector average and substantially cheaper than established players like United Breweries (109.95x), Radico Khaitan (90.01x), and Allied Blenders (62.59x). This valuation discount exists despite G M Breweries delivering comparable or superior return on equity metrics relative to most peers.

G M Breweries' return on equity of 16.39% ranks among the highest in the peer group, matched only by Allied Blenders (16.49%) and Tilaknagar Industries (16.55%), whilst significantly exceeding United Breweries (9.86%) and Radico Khaitan (12.80%). The company's price-to-book ratio of 2.90x represents the most attractive valuation in the peer set, with competitors trading at multiples ranging from 3.21x to 13.99x. This valuation discount appears unjustified given G M Breweries' superior profitability metrics and debt-free balance sheet, suggesting potential for multiple re-rating as the company's improved operational performance gains broader market recognition.

The company's debt-free status (net debt-to-equity of -0.11) provides a significant advantage over peers, most of whom carry positive leverage. This financial strength enables G M Breweries to invest in growth initiatives, weather industry downturns, and return capital to shareholders without the burden of interest obligations. The dividend yield of 0.60%, whilst modest, reflects the company's preference for reinvesting profits into growth opportunities rather than aggressive payout policies.

Valuation Analysis: Premium Valuation Reflects Strong Fundamentals but Limits Upside

At the current market price of ₹1,209.35, G M Breweries trades at a P/E ratio of 19.91x based on trailing twelve-month earnings, representing a significant premium to its historical valuation range. The company's valuation grade has deteriorated from "Very Attractive" in September 2025 to "Very Expensive" as of January 2026, reflecting the 151.38% stock price appreciation over the past three years. The price-to-book value of 2.90x, whilst reasonable compared to peers, represents a premium to the company's historical average and suggests limited margin of safety at current levels.

The EV/EBITDA multiple of 20.41x and EV/EBIT multiple of 21.13x indicate elevated valuations relative to both the company's historical norms and broader market benchmarks. These multiples have expanded considerably as the stock price has outpaced earnings growth, compressing the risk-reward equation for new investors. The company's enterprise value to sales ratio of 4.04x reflects market recognition of G M Breweries' strong profitability and margin profile, but also leaves little room for disappointment if operational momentum falters.

The modest dividend yield of 0.60% provides minimal income support for investors, with the company maintaining a conservative payout ratio of 8.45% to retain capital for growth investments. The latest dividend of ₹7.50 per share, whilst representing an increase from historical levels, remains small relative to the current stock price. The 52-week range of ₹579.10 to ₹1,328.00 illustrates the stock's volatility, with the current price sitting approximately 9% below the recent peak but 109% above the 52-week low.

Shareholding Pattern: Stable Promoter Base with Minimal Institutional Interest

G M Breweries' shareholding structure has remained remarkably stable over the past five quarters, with promoter holding consistently maintained at 74.43%. This unwavering promoter commitment signals strong confidence in the company's long-term prospects and alignment of interests with minority shareholders. The promoter group, led by Jimmy William Almeida Kashyap with 61.76% stake and Almeida Holdings Private Limited with 10.68%, has demonstrated no inclination to reduce holdings despite significant stock price appreciation, suggesting belief in further upside potential.

The institutional shareholding pattern reveals minimal participation from mutual funds (0.00%) and insurance companies (0.00%), indicating the stock remains largely undiscovered by domestic institutional investors. Foreign institutional investors hold a modest 0.38% stake, with 16 FII entities participating as of the latest quarter. This minimal institutional ownership presents both an opportunity and a concern—whilst it suggests potential for future inflows if the company gains institutional attention, it also reflects possible concerns about liquidity, corporate governance, or growth sustainability that have deterred larger investors.

Non-institutional investors, comprising retail and high-net-worth individuals, hold approximately 25.19% of the equity, providing reasonable free float for trading. The absence of promoter pledging (0.0% pledged shares) eliminates a key risk factor and demonstrates the promoters' financial strength. However, the lack of institutional validation through meaningful mutual fund or insurance company holdings may constrain valuation multiples and limit stock price discovery, particularly during periods of market volatility.

Stock Performance: Exceptional Returns but High Volatility Warrants Caution

G M Breweries has delivered exceptional returns across most timeframes, significantly outperforming both the Sensex benchmark and the broader beverages sector. Over the past year, the stock has generated returns of 51.74% compared to the Sensex's 9.00% gain, producing alpha of 42.74 percentage points. The three-year performance has been even more impressive, with cumulative returns of 151.38% versus the Sensex's 41.87%, demonstrating sustained outperformance over an extended period. The five-year return of 245.37% places the stock among the top performers in the small-cap universe.

However, these impressive returns have come with significant volatility. The stock's one-year volatility of 47.93% places it firmly in the "high risk, high return" category, substantially exceeding the Sensex's volatility of 11.34%. The beta of 1.35 indicates the stock moves 35% more than the broader market, amplifying both gains and losses during market swings. Recent price action illustrates this volatility, with the stock touching a 52-week high of ₹1,328.00 before declining to the current level of ₹1,209.35, representing a 9% correction from the peak.

The stock's outperformance versus the beverages sector has been particularly striking, with G M Breweries delivering 51.74% returns over the past year whilst the sector declined 14.86%, resulting in 66.60 percentage points of outperformance. This divergence reflects both the company's strong operational execution and potential sector rotation as investors favour companies with demonstrated earnings growth over broader thematic plays. The technical trend has shifted to "Bullish" as of December 26, 2025, supported by positive MACD, Bollinger Bands, and moving average signals, though the KST indicator shows mildly bearish tendencies on the weekly timeframe.

Investment Thesis: Strong Fundamentals Meet Stretched Valuations

The investment case for G M Breweries rests on several compelling pillars: dominant market position in Maharashtra's country liquor segment, debt-free balance sheet providing financial flexibility, consistent margin expansion reflecting operational improvements, and management's demonstrated execution capability. The company's ROE of 16.39% and ROCE of 15.15% validate efficient capital allocation, whilst the progressive improvement in operating margins from 16.96% in March 2025 to 26.01% in December 2025 demonstrates operational leverage and pricing power.

The Mojo Score of 64/100 reflects this balanced assessment, with positive marks for near-term financial momentum (Positive quarterly trend) and technical setup (Bullish indicators), average quality grade based on long-term financial performance, but concerns about valuation (Very Expensive grade). The score has improved from 55 in July 2025, reflecting the company's sustained operational improvements, but remains in "HOLD" territory rather than "BUY," indicating the risk-reward balance has shifted as the stock price has appreciated faster than fundamentals.

Key Strengths & Risk Factors

Outlook: What to Monitor in Coming Quarters

The coming quarters will be critical in determining whether G M Breweries can sustain its impressive margin expansion and growth momentum. Investors should closely monitor the company's ability to maintain operating margins above 24-25% on a consistent basis, as this will validate the structural nature of recent improvements rather than temporary benefits. The management's execution on IMFL portfolio expansion will be crucial for long-term growth, given the structural headwinds facing the country liquor segment from premiumisation trends.

The stock's technical setup remains bullish with support from moving averages, but the recent correction from ₹1,328.00 to ₹1,209.35 suggests profit-booking at higher levels. Key technical support exists at the ₹1,068.71 level (20-day moving average), with stronger support at ₹939.07 (100-day moving average). Any breakdown below these levels could trigger further correction toward the ₹819.26 zone (200-day moving average). Conversely, a breakout above ₹1,328.00 could open upside toward ₹1,450-1,500 levels, though valuation concerns would intensify at those prices.