Buy United Spirits Ltd For Target Rs.1,108 - Motilal Oswal Financial Services Ltd
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P&A outperformance continues; beat on margin
* Standalone net sales increased 7.5% YoY to INR29.9b (est. of INR29.3b) in 3QFY24, with P&A growth of 10% (88% revenue mix).
* Demand momentum was relatively muted QoQ; however, the premiumization trend remained intact.
* Consumer engagement was high due to festivals, the Cricket World Cup and the wedding season.
* The company is cautiously optimistic about its growth outlook.
* Overall reported volume declined 1.8% (est. 0.7% growth), while P&A volume grew ~5%.
* Gross margin was up 290bp YoY/flat QoQ at 43.4%. (est. 42.4%).
* Employee costs declined 12%, whereas A&P and other expenses grew 18% and 5% YoY, respectively.
* As a % of sales, advertising costs rose 100bp YoY to 11%, whereas staff costs declined 110bp to 4.7% and other expenses fell 30bp YoY to 11.3%.
* EBITDA margin expanded by 300bp YoY (flat QoQ) to 16% (est. 15%).
* EBITDA increased by 33.6% YoY to INR4.9b (est. INR4.3b).
* PBT grew 51.2% YoY to INR4.6b and adjusted PAT rose 61% to INR3.5b (est. INR3.5b/INR2.6b).
* In 9MFY24, net sales/EBITDA/Adj. PAT grew 2%/25%/29%.
Segmental commentary
* Prestige & Above (P&A) segment’s net sales grew 10% and volume grew 4.6% to 13.4m cases.
* In 9MFY24, P&A segment revenue/volume grew 14% and 6% YoY.
* Reported net sales for the Popular segment declined 12.4% YoY and volume declined 22.8% YoY to 3.1m cases.
* In 9MFY24, Popular segment revenue/volume declined 5%/16% YoY.
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