EUR 120.00 For Business Accounts Only

MOSL: MOrning India (5/September/19): 1. United Breweries - Annual Report Update (Stellar year, but dark clouds gathering); 2. Cement; 3. Financials (a. Expert Speak, b. RBI Update)

MOrning India (5/September/19): 1. United Breweries - Annual Report Update (Stellar year, but dark clouds gathering); 2. Cement; 3. Financials (a. Expert Speak, b. RBI Update)

 

Today’s top research idea

United Breweries (Annual Report Update): Stellar year, but dark clouds gathering; Key takeaways from FY19 annual report

• FY19 was another stellar year for UBBL, with sales/volumes growing in double digits for the second consecutive year, EBITDA increasing by 26.1% (FY18: +34.1%) and PAT rising by 42.7% (FY18: +71.6%).
• Premiumization trend continues to be strong, with 30% CAGR in the super-premium segment of the market. Several of the company's products are performing well in this segment
• Working capital continued to improve for the second straight year, led by receivable days. However, 'other assets' increased surprisingly by 40% led by 'balance with statutory/government authorities'.
• Muted demand, a sharp increase in material costs and significant ongoing capacity addition pose challenges to the earnings growth outlook (we estimate 10% EPS CAGR over FY19-21).This, along with deterioration in the already lesser than consumer peers' RoCEs and RoEs (~200bp reduction over the next two years in both metrics) and expensive valuations (51.4x FY21E EPS), prompts us to maintain our Neutral stance..

Piping hot news

RBI mandates banks to link fresh retail loans to external benchmark

The Reserve Bank of India (RBI) on Wednesday made it mandatory for banks to link all their fresh retail loans to an external benchmark, effective October 1 — the central bank’s repo rate being one such benchmark. All public sector banks have moved to such a regime voluntarily, while private banks are yet to. The state-run banks have introduced repo-linked products for floating-rate home and auto loans, but the RBI said loans to micro, small and medium enterprises (MSMEs) should also be linked to an external benchmark.