Motilal Oswal - MOSL: CONSUMER- ALCOHOLIC BEVERAGES-Risk/reward now favors UNSP compared to UBBL

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Motilal Oswal

Krishnan Sambamoorthy

EUR 120.00 For Business Accounts Only

MOSL: CONSUMER- ALCOHOLIC BEVERAGES-Risk/reward now favors UNSP compared to UBBL

Consumer- Alcoholic Beverages: Risk/reward now favors UNSP compared to UBBL; Upgrading UNSP to Buy, Downgrading UBBL to Neutral

The Alcoholic Beverages (alcobev) segment in India remains an attractive investment candidate driven by healthy earnings growth and improving ROCEs.
Yet, despite these improving metrics, FY19E PAT of USD108m/USD87m for UNSP/UBBL is still low and indicates strong multi-year growth opportunities ahead.
While we have historically had a preference for UBBL over UNSP, we believe, a combination of potentially slower earnings growth for UBBL from FY20 onwards compared to the preceding years, potential headwinds to earnings emerging now, and fair valuation after a best-of-breed stock price run-up means that upside is limited from a one-year perspective.
On the other hand, UNSP offers stronger earnings growth opportunity compared to UBBL (34% CAGR v/s 20% CAGR over FY19-21), and would consequently have better ROCE expansion compared to UBBL. UNSP trades at a ~10% discount to sector P/E multiples and is at ~25% discount to UBBL’s P/E multiple. Our DCF-based target price of INR700 gives an upside of 25% for UNSP compared to an upside of only 7% for UBBL.
We are therefore changing our recommendation for UNSP from Neutral to BUY and on UBBL from BUY to Neutral.

11/03/2019 26 EN

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Motilal Oswal

Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.

Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.

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Analysts

Krishnan Sambamoorthy

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MOSL: CONSUMER- ALCOHOLIC BEVERAGES-Risk/reward now favors UNSP compared to UBBL

MOSL : HOME FIRST FINANCE COMPANY: Earnings in-line with sustained improvement in asset quality

MOSL : SHOPPERS STOP: Ticking the right boxes

MOSL : ERIS LIFESCIENCES: Enhanced efforts toward product launch-related activities

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