Company Update : United Breweries by Motilal Oswal Financial Services Ltd
Strong volume growth despite seasonal headwinds; miss on margin.
* UBBL’s standalone net sales grew 16% YoY to INR28.6b (est. INR27.2b).
* Volume growth stood at 11% YoY (est. 4%), with premium segment’s volume posting a sharp 46% YoY growth.
* The North, West, and South regions posted 8%, 13%, 16% growth, while East reported a 1% decline.
* Volume growth, mainly driven by Andhra Pradesh, Assam, and Uttar Pradesh, was partially offset by declines in Karnataka and West Bengal.
* The positive price mix was driven by price increases in Telangana, Uttar Pradesh, Orissa, and Rajasthan, coupled with a favorable mix, mainly from premiumization.
* Gross margin contracted 50bp YoY to 42.5% (est. 43.7%; 42.1% in 4QFY25).
* Employee expenses grew 9% YoY and other expenses were up 19% YoY.
* EBITDA margin contracted 70bp YoY to 10.8% (est. 12.1%, 8% in 4QFY25).
* EBITDA increased 9% YoY to INR3.1b (est. INR3.3b).
* Interest cost was up ~600% YoY to INR112m (est. INR24m).
* APAT was up 6% YoY to INR1.8b (est. INR2.1b).
Other key highlights
* Volume grew 11% in 1Q, despite a strong base last year due to elections during the peak season.
* The company gained market share during the quarter.
* The premium portfolio grew 46% faster than the overall market. Strong growth was seen in Kingfisher Ultra, Amstel Grande, and Heineken Silver.
* Amstel Grande was launched in Karnataka, following a favorable response in Maharashtra, West Bengal, and Uttar Pradesh.
* Capex stood at INR1,360m, primarily focused on sales and the supply chain.
* The Mangalore unit was shut down to improve efficiency, with the focus shifted to the Mysore brewery, which was expanded to boost supply capacity.
* The company remains optimistic about future growth, supported by rising incomes, young population, and increasing consumer preference for premium beers.
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