United Breweries' Q4FY18 results (Outperformer) - Stellar quarter... Strong FY19 outlook!
Q4FY18 result highlights
- United Breweries’ (UBL) net sales increased by 32% yoy to Rs14.7bn (est Rs13.3bn), EBITDA increased by 106% yoy to Rs2.1bn (est Rs1.6bn), Reported PAT came in at Rs909m (est: Rs600m) versus PAT of Rs67m in base quarter.
- Overall volumes grew by 24% yoy led by market share gains (industry volume growth of 22% yoy) and recovery in Maharashtra volumes. Net sales growth was further aided by better state mix (Q3 realization growth was 5% while Q4 was 8%).
- Gross margins increased 150bps yoy to 52.8% due favourable state mix (increased contribution from Maharashtra). Staff cost and other expenses increased by 23% and 20% respectively. Resultant EBITDA margins improved by 510bps to 14.2% benefitting from operating leverage.
- Interest cost declined by 21% yoy due to debt reduction and lower short term interest rates. Other income was up 12% yoy. Depreciation expense was down 22% yoy (one off impairment expense of Rs160mn in 4QFY17). Resultant PAT came in at Rs909m versus Rs 67m in 4QFY17.
Key positives: Ahead of industry volume growth
Impact on financials: Factoring strong performance we have increased our FY19/20E earnings estimate by 8% each.
Valuations & view
Despite a challenging environment, UBL has double digit volume growth in FY18 for the first time in 7 years. We expect volume growth trajectory to remain strong aided by stable regulatory environment and steady market share gains, which coupled with improved mix and benefit of recent price hikes will drive the overall revenue growth. Moreover, cost control initiatives, favourable operating leverage and reduction in interest cost will boost the overall profitability. We are factoring a 13% revenue CAGR (8% volume CAGR) and a 120bp EBITDA margin expansion which will drive 25% earnings CAGR over FY18-20E. United Breweries is one of our top picks in the consumer coverage universe. Maintain Outperformer.
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.
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