United Breweries' Q2FY19 results (Outperformer) - Strong beat across all key metrics
Q2FY19 result highlights
- Net sales increased by 19.3% yoy to Rs15.3bn (est: Rs14.4bn), EBITDA increased by 43% yoy to Rs 3.2bn (est: Rs2.5bn), PAT increased by 75% yoy to Rs 1.6bn (est: Rs1.15bn).
- Adjusting for the IND AS 115 adjustment (sales are recognized from hereon at the time of reaching the depots as compared to leaving the factory) to sales in the current quarter, net sales growth was 17% yoy, EBITDA growth was 41% yoy and PAT growth was 71% yoy.
- Volumes increased by 17% yoy (est:12%) compared to industry growth of 14% yoy.
- Gross margins improved by 160bps yoy to 55.6% aided by favourable mix and effective input cost management. Staff cost increased by 1.5% yoy, Other expenses increased by 16.3% yoy. Resultant EBITDA margins improved by 360bps yoy to 20.9%.
- Depreciation was down 1% yoy. Other income was up 3x to Rs37m while interest cost declined by 69% yoy as improved cash flow and better working capital management(improved debtor collections) resulted in reduction in debt. Total borrowings (non-current + current) have reduced from Rs2.57bn in March 18 to Rs2.1bn as on Sep 18.
Key positives: Strong volume growth, gross margin expansion & debt reduction
Impact on financials: Factoring strong performance, we have increased our FY19/20/21E earnings estimate by 10%/5%/7%.
Valuations & view
UBL reported yet another stellar performance, with ahead of industry volume growth indicative of continued market share gains across key markets. With underlying industry growth trends remaining positive and supply disruption issues now behind, maintaining ahead of industry volume growth for UBBL shouldn’t be a challenge. Further, better mix, leverage benefit and focus on cost efficiencies, will continue to drive margin expansion (factoring 16% EBITDA CAGR with 120bps margin expansion over FY19-21E). With improved profitability & better working capital management, company remains on track to become debt free in FY20E. Given the strong execution and consistency in earnings delivery, we maintain our Outperformer rating on the stock.
United Breweries is an alcoholic brewing company based in India. Co. is engaged in the manufacturing and marketing of beer made from malt and allied products. Co.'s brewery products include Kingfisher, UB Premium Ice Beer, Charger Extra Strong Beer, Kalyani Black Lable, Kalyani Export Special, Kalyani Black Label Strong, Bullet Super Strong Beer and UB Export. Co. is also engaged in manufacturing of liquors, beer, leather shoes, organic and inorganic petrochemicals, ciprofloxacin, amitriptylene, and ibuprofen. Co.'s other activities include publishing and printing newspaper and journals; selling and servicing of Hitech Medical equipment; operation of a cable television network and others.
IDFC Securities Ltd., a subsidiary of the Infrastructure Development Finance Company (IDFC) wherein the Government of India holds a 20% interest, is India's leading equities broker catering to most of the prominent financial institutions, both foreign and domestic investing in Indian equities. A research team of experienced and dedicated experts ensures the flow of critically investigated stock ideas and portfolio strategies for our clients. Our coverage spans across various growth sectors such as agriculture, automobiles, Consumer Goods, Technology, Healthcare, Infrastructure, Media, Power, Real Estate, Telecom, Capital Goods, Logistics, Cement amongst other sectors. Our clients value us for our strong research-led investment ideas, superior client servicing track record and exceptional execution skills.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.