Buy United Breweries Ltd For Target 1,480 by Choice Institutional Equities Ltd
Mix Improvement To Boost Realisation and Revenue Growth
UBBL's premium portfolio volume has expanded at ~45% CAGR over the past two years. Premium volume has been resilient, posting ~21% growth even when overall volumes grew only by ~3% in FY26. We note AB InBev and Carlsberg have higher premium saliency; however, UBBL's stronger growth suggests gradual catch-up in portfolio mix. Led by brands, such as Kingfisher Ultra, Heineken and Amstel Grande, continued premium scale-up is estimated to support realisation gains. Earnings momentum is cemented by the fact that premium beer generates ~2x EBITDA margin over economy. We, therefore, expect net revenue CAGR of 11.7% over FY26–FY29E driven by an improvement in product mix.
Defending Market Share by Scaling Up Cooler and Brewery network
UBBL controls ~50% of the beer market in India. The large surface area is supported by a vast manufacturing and distribution footprint. The company operates 17 breweries across 13 states, improving proximity to under-served markets and lowering logistics cost. Further capacity addition include new greenfield brewery in Uttar Pradesh [1–3 Mn Hectolitres (MHL) capacity with planned capex of ~INR 7.5 Bn], alongside recently added est. 8–10 Mn cases per month can-line capacity in Maharashtra and ~0.9 MHL can-line expansion in Telangana. Distribution strength has also improved, with visicoolers increasing from ~15,000 to ~50,000 units, growing 3x in recent years. Thus, we believe that UBBL is well-placed to protect its position as a market leader with targeted capacity addition and deeper distribution reach
Cost-efficiency and Backward Integration Improving Profitability
UBBL's asset-light partnership with Soufflet Malt India enhances backward integration and improves input cost visibility. The Kisan Unnati programme is increasing domestic barley procurement and lowering logistics cost. Packaging remains a key cost driver (~64% of COGS), but the Returnable Glass Bottle system enables ~95% reuse, structurally reducing unit cost. In addition, recently added ~INR-1,100 Mn canning line expansion in Maharashtra and ~INR-900 Mn canning line expansion in Telangana aims to integrate aluminium can supply amid shortage. These initiatives are expected to drive strong operating leverage, with EBITDA per case projected to grow from INR 39 in FY26 to ~INR 58 by FY29E, indicating a ~15% CAGR, underpinning sustained margin expansion
Investment View:
UBBL is well positioned to deliver sustained growth driven by tailwinds in key markets (KA, MH and JH) premium mix improvement, ~50% market leadership and capacity-led distribution expansion. Structural cost efficiencies and operating leverage are expected to support ~28% Net Income CAGR over FY26–FY29E. We initiate with BUY rating and TP of INR 1,480 (DCF), implying FY28E PE of 56.5x, upside of 15.3%.
Key Risks:
UBBL faces risks from possible state policy changes, likely input cost inflation and packaging shortages, which can affect margin and growth. Premium mix execution and seasonal demand variability may also drive earnings volatility.
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