MOSL: UNITED SPIRITS (Neutral)-Weak performance-medium- to long-term outlook appears better
United Spirits: Weak performance; medium- to long-term outlook appears better, though
(UNSP IN, Mkt Cap USD7.9b, CMP INR3489, TP INR3515, 1% Upside, Neutral)
- UNSP posted standalone net sales decline of 7.8% YoY to INR22.6b, with underlying net sales declining by 2% YoY. Underlying net sales for Prestige & Above segment (P&A; 64% of net sales) were down by 1% YoY and for Popular segment (36% of net sales) were down by 2% YoY. Volumes declined 3% and 22% YoY for P&A and Popular, respectively.
- Gross margin expanded 530bp YoY (-20bp QoQ) to 47.4%, led by price increases, productivity initiatives and operating model changes. Adspend behind brands was up sharply by 320bp YoY to 11.5% and other expenses rose 210bp YoY. This led to flat EBITDA margin YoY. Excluding the one-off impact, the gross margin expanded 370bp, while the EBITDA margin shrunk 30bp YoY.
- EBITDA declined 7.6% YoY to INR2.7b (est. of INR3.6b). Interest cost fell 28.6% YoY to INR658m, led by debt reduction and favorable rates. Adjusted PAT thus stood flat at INR1.5b (est. of INR1.9b).
- Concall highlights: (1) Impact of route to market (RTM) change in Haryana should moderate in the coming quarter, while the impact of RTM change in Punjab can heighten in the next quarter. Overall impact from RTM changes are expected to normalize in 3-4 months. (2) Commodity costs were relatively benign this quarter; company expects hardening of costs going forward.
United Spirits is engaged in the business of manufacture, purchase, sale and distribution of alcoholic beverages, mainly, whiskey, brandy and rum. Co. is the flagship company of the UB Group Spirits Business. Co. conducts its activities in the Indian Made Foreign Liquor (IMFL) industry segment through Tie-up manufacturing/brand franchise. Co. maintains a portfolio of 60 brands, sourced through its manufacturing network which comprises 12 owned distilleries and 27 contracted sources of supply. Co.'s brand names include, Black Dog, Single Malt, No. 1 McDowell's brandy, Caesar, Red Riband, White Mischief, Celebration XXX, Old Cask, etc.
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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