Hold United Breweries Ltd For Target Rs.1580 - ICICI Direct
Follow us Now on Telegram ! Get daily 10 - 12 important updates on Business, Finance and Investment. Join our Telegram Channel
https://t.me/InvestmentGuruIndiacom
Download Telegram App before Joining the Channel
Volumes continue to remain subdued
About the stock: United Breweries (UBL) is the biggest beer player in the domestic market (~52% market share), a sector largely dominated by MNCs (~85% of market).
* On-trade sales comprise ~25% of revenues (rest 75% off-trade).
* Heineken, one of the world’s largest beer companies, holds 72.7% stake in United Breweries.
Q1FY22 Results: UBL reported volume growth weaker than expected.
* Revenues grew 121% YoY to | 1118 crore, led by volume growth of 115%
* Absolute EBITDA came in at | 95 crore vs. a loss of | 96 crore in Q1FY21
* PAT came in at | 31 crore vs. a loss of | 114 crore in Q1FY21
What should investors do?
The beer sector has been at the receiving end for the past three years (national polls, followed by two lockdowns) during its peak period (April-June); with revival in on-trade channels the sector is expected to gain traction
* With the recent sharp run-up in the stock (mainly due to acquisition of shares by the promoter), we change our recommendation to Hold
Target Price & Valuation: We value the stock at | 1580 i.e. 57x P/E on FY23E EPS
Key triggers for future price performance: Beer stays an underpenetrated segment (12% market share in alcohol consumed), a preferred choice of ready to drink product for the youth and, thus, has long term growth potential (in a landscape historically dominated by liquor).
* Newer beer excise regimes (lower excise than liquor), to help in market share gains for the beer sector over the liquor sector
* Strong fundamentals (b/s, cash flow), to help UBL further consolidate its leadership position.
Alternate Stock Idea: Apart from UBL, we remain positive on United Spirits
* United Spirits (USL) is India’s leading alcoholic beverage company and subsidiary of global leader Diageo plc. It manufactures, sells premium liquor brands such as Johnnie Walker, Black Dog, Black & White, Vat 69, Antiquity, Signature, Royal Challenge, McDowell’s No 1, Smirnoff and Captain Morgan
* We have a BUY rating on the stock, with a target price of | 770
To Read Complete Report & Disclaimer Click Here
https://secure.icicidirect.com/Content/StaticData/Disclaimer.html
Above views are of the author and not of the website kindly read disclaimer
