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What is the story about?
Shares of United Spirits Ltd. gained on Friday, May 15, after the company reported its fourth quarter earnings. The company reported a strong operational beat in the quarter under review.
Its revenue was at ₹3,054 crore, up 3.7% as indicated in its quarterly update. Its profit after tax increased to ₹539 crore, higher than a CNBC-TV18 poll of ₹432 crore.
The company's earnings before interest, tax, depreciation and amortisation (EBITDA) increased to ₹593 crore, marginally higher than street estimates of ₹557 crore.
United Spirits' gross margins increased 390 basis to 47.7% from last year. Its EBITDA margins expanded to 19.4% from 17.3% in the year-ago period.
The company's other income was at ₹295 crore in the fourth quarter from ₹173 crore in the previous. Its effective tax rate was at 19.2% compared to 22.4% last year.
United Spirits' overall volumes were down 5.6%.
Its P&A volume was up 3.1% while its value growth was up 5% at 2,745 crore.
The company's popular volume declined 16.1%, value growth was down 13.2% at 271 crore.
United Spirits said its growth was at 8.5%, excluding Maharashtra and Andhra Pradesh. It said it witnessed the entire adverse impact of Maharashtra made liquor policy. It said it is confident of delivering on medium-term guidance of double digit growth.
Brokerages are largely positive on United Spirits and see up to a 29.7% upside. While JPMorgan has an "overweight" rating, Nomura has a "buy" recommendation and CLSA has a "hold" rating.
The brokerage has an "outperform" rating on United Spirits with a price target of ₹1,445 apiece.
It said the company delivered a solid beat on fourth quarter EBITDA, despite relatively unexciting revenue growth.
The brokerage said the positive surprise was led by gross margin delivery coming ahead of expectations at 47.3%, which is a multi-quarter high besides lower than anticipated adverting and promotion spends and employee costs.
Also, the management narrative sounds positive regarding the growth trajectory in FY27, noting a strong set up FY27 enabled by progressive policy interventions in Karnataka and potential benefits from the UK FTA, JPMorgan said.
The brokerage has a "buy" rating a price target of ₹1,650 apiece on the stock.
It said the company's fourth quarter sales were below estimates, while its underlying EBITDA growth was in-line.
Nomura said volume declined by 5.6% compared to expectations of a 3.6% drop largely because of the impact of MML being more on Popular albeit less on P&A.
It said the operating margin of 19.4% was a tad better than estimates of 18.5% due to lower ad spends. It added that on an underlying basis, EBITDA margin was at 20%.
The brokerage has a "hold" rating and a price target of ₹1,238 apiece.
It said the volume declined 5.6% in the quarter, and was 4% below expectation.
It said its net sales grew 3.4% and came in at 4.5%, were 2.3% below expectations.
Its gross margin expanded by 281 basis points and come in 92 basis points above its estimates.
29 analysts have coverage on United Spirits, of which 24 have a "buy" rating, three have a "hold" rating and two have a "sell" rating.
Shares of United Spirits are trading 4.9% up at 1,334.5 apiece on Friday. It has declined 6.3% this year, so far.
Its revenue was at ₹3,054 crore, up 3.7% as indicated in its quarterly update. Its profit after tax increased to ₹539 crore, higher than a CNBC-TV18 poll of ₹432 crore.
The company's earnings before interest, tax, depreciation and amortisation (EBITDA) increased to ₹593 crore, marginally higher than street estimates of ₹557 crore.
What led to the beat?
United Spirits' gross margins increased 390 basis to 47.7% from last year. Its EBITDA margins expanded to 19.4% from 17.3% in the year-ago period.
The company's other income was at ₹295 crore in the fourth quarter from ₹173 crore in the previous. Its effective tax rate was at 19.2% compared to 22.4% last year.
Volume details
United Spirits' overall volumes were down 5.6%.
Its P&A volume was up 3.1% while its value growth was up 5% at 2,745 crore.
The company's popular volume declined 16.1%, value growth was down 13.2% at 271 crore.
Company says
United Spirits said its growth was at 8.5%, excluding Maharashtra and Andhra Pradesh. It said it witnessed the entire adverse impact of Maharashtra made liquor policy. It said it is confident of delivering on medium-term guidance of double digit growth.
Brokerage views
Brokerages are largely positive on United Spirits and see up to a 29.7% upside. While JPMorgan has an "overweight" rating, Nomura has a "buy" recommendation and CLSA has a "hold" rating.
JPMorgan
The brokerage has an "outperform" rating on United Spirits with a price target of ₹1,445 apiece.
It said the company delivered a solid beat on fourth quarter EBITDA, despite relatively unexciting revenue growth.
The brokerage said the positive surprise was led by gross margin delivery coming ahead of expectations at 47.3%, which is a multi-quarter high besides lower than anticipated adverting and promotion spends and employee costs.
Also, the management narrative sounds positive regarding the growth trajectory in FY27, noting a strong set up FY27 enabled by progressive policy interventions in Karnataka and potential benefits from the UK FTA, JPMorgan said.
Nomura
The brokerage has a "buy" rating a price target of ₹1,650 apiece on the stock.
It said the company's fourth quarter sales were below estimates, while its underlying EBITDA growth was in-line.
Nomura said volume declined by 5.6% compared to expectations of a 3.6% drop largely because of the impact of MML being more on Popular albeit less on P&A.
It said the operating margin of 19.4% was a tad better than estimates of 18.5% due to lower ad spends. It added that on an underlying basis, EBITDA margin was at 20%.
CLSA
The brokerage has a "hold" rating and a price target of ₹1,238 apiece.
It said the volume declined 5.6% in the quarter, and was 4% below expectation.
It said its net sales grew 3.4% and came in at 4.5%, were 2.3% below expectations.
Its gross margin expanded by 281 basis points and come in 92 basis points above its estimates.
29 analysts have coverage on United Spirits, of which 24 have a "buy" rating, three have a "hold" rating and two have a "sell" rating.
Shares of United Spirits are trading 4.9% up at 1,334.5 apiece on Friday. It has declined 6.3% this year, so far.
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