Company Update : United Breweries by Motilal Oswal Financial Services Ltd
Weak revenue delivery; multi-quarter low margin
* UBBL’s standalone net sales declined by 3% YoY to INR20.5b (est. INR21.8b) after clocking 16% growth in 1QFY26. We were already building up weak growth due to weak seasonal demand and extended monsoon, but it was weaker than expected.
* Overall volume declined by 3% (est. +3%), while the premium segment sustained robust growth and clocked 17% YoY growth.
* West and South regions posted volume growth of 16% and 4%, while North and East regions posted volume decline of 18% and 6%.
* The volume growth seen in Maharashtra, Andhra Pradesh, and Assam drove regional performance.
* Growth was offset by unfavorable weather across key markets and higher channel inventories in 2QFY25, following the election-impacted peak season.
* Gross margin contracted 100bp YoY to 42.8% (est. 44%, 42.5% in 1QFY26).
* Employee expenses grew 6% YoY and other expenses rose 7% YoY.
* EBITDA margin contracted 440bp YoY to 6.3% (est. 9.8%, 10.8% in 1QFY26). After delivering an improved margin trajectory, there was a sharp contraction in margin in 2Q.
* EBITDA declined 43% YoY to INR1.3b (est. INR2.1b).
* Interest cost rose ~570% YoY to 147m (est. INR50m).
* APAT declined 65% YoY to INR0.5b (est. INR1.2b).
* In 1HFY26, net sales grew 7%, while EBITDA and APAT declined 14% and 25%.
Other points
* During the quarter, the company expanded its value portfolio with the launch of London Pilsner in Orissa and Kalyani Black Label in West Bengal.
* The premium segment posted 17% YoY volume growth during the quarter, with 1HY26 growth at 33%, led by strong traction in Kingfisher Ultra, Kingfisher Ultra Max, and Heineken® Silver.
* Capex investments stood at INR2,930m during the quarter, primarily towards the new greenfield facility in Uttar Pradesh and other commercial capex aimed at supporting future qualitative growth.
* As part of its network optimization and productivity enhancement program, the company closed its Mangalore unit earlier this year, with additional measures underway to drive operational excellence and cost efficiencies across operations.
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