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Strong growth across key states
*Beer volume trends continue to stay strong in 1QFY20, with state-wise data indicating 10% volume growth in key markets (~50% of industry vols.) despite election restrictions. Karnataka, AP, Kerala and Odisha grew strongly at 11%, 19% 10% & 19%, respectively.
* Our channel checks also point to strong growth in other Eastern markets, at 20%+, led by the extended summer and high growth in West Bengal, which is driven by low comparables (~40% decline in FY19) and ~10% price cut by brewers in Apr'19.
* UBL has lost some market share in Karnataka (as per state data) likely due to manufacturing restrictions during elections but strong growth and share gains in other markets should offset the impact and still drive healthy volume growth in Q1 (est. of 8%).
* Growth trends across states are stronger than most consumer categories and appear positive for UBL. At 42x FY21E EPS, the stock is attractive given better volume growth outlook. Maintain it as our high-conviction pick with OW stance in sector EAP.
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