MOSL: UNITED BREWERIES (Buy)-Improving operating environment reinforces our positive outlook
​United Breweries: Improving operating environment reinforces our positive outlook
(UBBL IN, Mkt Cap USD4.5b, CMP INR1101, TP INR1320, 20% Upside, Buy)
- Net sales grew 23.1% YoY (est. of +7%) to INR12.8b in 2QFY18. Despite the highway ban, volume rose 11% YoY (est. of flat volume) v/s 5% growth for the industry - another quarter of market share gains for UBBL. The company has now gained share in both FY17 and 1HFY18. Most markets in the country saw positive momentum, barring Maharashtra, West Bengal and Kerala.
- Gross margin shrunk 10bp YoY to 54.1% in 2QFY18. EBITDA margin expanded 570bp YoY to 17.4% in 2QFY18. Staff costs reduced by 60bp YoY and other expenses declined by 520bp YoY, likely led by strong operating leverage. 2Q is usually a weak quarter for sales and margins. EBITDA margin of 17.4% in 2QFY18 is thus perhaps an all-time 2Q high for UBBL. EBITDA/PAT were thus 2x/3x our forecasts.
- 1HFY18 performance: Net sales rose 13.4% YoY. EBITDA margin expanded 250bp YoY to 18.3%. EBITDA grew by 31.1% YoY to INR5.4b and PAT by 46.9% YoY to INR2.55b.
- Management call takeaways: (1) UBBL has gained market share in all key states, including Andhra Pradesh, Telangana, Karnataka and Maharashtra. (2) There were no one-offs on margins.
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.
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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