Reduce United Spirits Ltd for the Target Rs. 1,230 by Choice Institutional Equities
Key Conference Call Highlights
Portfolio Updates:
* P&A and Popular segments grew by 8.6% / -0.3%, respectively. However, excluding Maharashtra and Andhra Pradesh, growth was robust at 11.3% and 10.0%, respectively
* “Royal Challenge” continued to gain share in mid-prestige and new prestige segments, led by strong growth in 180 ml pocket packs
* “Signature” continued to perform competitively in upper prestige and entered the INR 10,000 Mn+ net revenue club
* “Black & White” is now the largest scotch brand in India by volume
* “Smirnoff” crossed 1 Mn cases in FY26. It reached around INR 3,500 Mn net revenue
* “Don Julio” crossed INR 1,000 Mn topline, becoming the fastest brand in the portfolio to reach this level. It has captured around one-third of the tequila market and continues to gain share
* For Johnnie Walker, India is now the number 3 market globally by volume and number 4
* “McDowell’s No.1” renovation rollout has started from Uttar Pradesh and will be expanded pan-India by end of August 2026
* New McDowell’s bundle includes revised liquid, upgraded packaging and new 180ml PET format
Key Markets:
* Rest of India, excluding Andhra Pradesh and Maharashtra, accounts for around 75–80% of revenues
* Andhra Pradesh and Maharashtra together reduced growth by around 120 bps in FY26
* Maharashtra has largely stabilised, though base impact may continue for the next two quarters
* Karnataka will support premiumisation after the state reduced excise tiers. Popular segment pricing is projected to increase by around 17–18%
Outlook:
* Management expects strong double-digit growth for the P&A portfolio in FY27
* Input cost pressure is mainly from packaging material. Packaging material cost inflation of 4–5% above the normal run rate in Q1FY27E, with a gross margin impact of 125–150 bps
* Inflation is expected to be offset over time through pricing and productivity gains. Pricing actions may support recovery across Karnataka, Rajasthan, Telangana and Madhya Pradesh
* A&P is now projected to be higher around 10.5%, rather than the earlier 9-10%
* Implementation of India-UK FTA remains under discussion; Scotch accessibility and premiumisation opportunity to improve once the treaty is implemented
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