Reduce United Spirits (UNITDSPR) Ltd For Target Rs. 1,360 By Choice Broking Ltd
Raising Spirits in Rough Markets
Strength and Stability Amid a Weak Deman Environment: For Q2FY26, UNITDSPR reported a growth of 11.6% YoY in net revenues rising to INR 31.7 Bn. This revenue growth was volume-led, while realization improved by 3.5%; P&A volumes improved by 8% YoY and total volume increased by 7.7% YoY. Volume growth was supported by continued re-entry momentum in Andhra Pradesh, healthy traction from innovation and renovation launches, and a favorable base. Margins were also supported with relatively stable COGS inflation for major input commodity basket. EBITDA margin stood at 20.8% increasing by 315bps YoY. The Maharashtra excise impact continued to weigh on performance, though broad-based demand trends remained healthy.
View and Valuation
In an expected bad quarter, UNITDSPR showed resilience and strength, posting a growth of 15.7%. Further, EBITDA margin only dropped by 52 bps, while gross margin dropped by 561bps to 47.1%. This has also improved our conviction in the company’s “Supply Agility Program”. Therefore, we upgrade our rating to “REDUCE” with a target price of INR 1,360 using the DCF approach, implying an FY27E/FY28E PE of ~43x/37x.
Strong Performance: Net Income +11% QoQ, while Margin declines 52bps
* The Revenue from Prestige and Above (P&A) category stood at INR 28.4Bn, growing at a rate of 12.4% YoY. The revenue from popular segment grew by 9.0% YoY to INR 2.7Bn, in line with CIE Est.
* NSR stood at INR 2,042 for P&A category (5.1% increase QoQ) while NSR for Popular segment stood at INR 1,031 (0.6% decrease QoQ) ? UNITDSPR reported a Net Revenue of INR 31.7Bn, posting a growth of 11.6% YoY (CIE Est. of INR 30.6Bn).
* EBIDTA came in at INR 6.6Bn (CIE Est. of INR 6.4Bn), a rise of 31.5% YoY, due to benefits coming in from Andhra Pradesh, favorable YoY base and renovation launches
* PAT came in at INR 4.6Bn (CIE estimates of INR 4.3Bn), versus INR 4.2Bn in Q1FY26, an increase of 11.3% QoQ.
Growth to be Driven by upcoming Macro Tailwinds
The consumer sentiment is seeing green-shots across geographies within the country. Festive Season, Tax breaks by government and improved systemic liquidity bode well for the upcoming few quarters. We believe with an expansive portfolio and an eye on costs, UNITDSPR is poised perfectly to capture the growing consumer spending.
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SEBI Registration no.: INZ 000160131
