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MOSL: UNITED BREWERIES (Annual Report Update)- Stellar year, but dark clouds gathering

UNITED BREWERIES (Annual Report Update): Stellar year, but dark clouds gathering

(UBBL IN, Mkt Cap USD4.9b, CMP INR1330, TP INR1371, 3% Upside, Neutral)

 

We pored over United Breweries’ (UBBL) annual report. Key takeaways:

• 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%). EBITDA margin and net margin were the highest ever at 17.6% and 8.7%, respectively, with RoE/RoCE nearing 20% for the first time in the company’s history.
• 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, with ‘Kingfisher Ultra’ and ‘Kingfisher Ultra Max’ together reaching over 5m cases, ‘Kingfisher Storm’ crossing 3m cases within just two years of launch and ‘Amstel’ (launched in May’18) attracting a good response. UBBL also forayed into non-alcoholic beverages in FY19 with ‘Kingfisher Radler’ and launched ‘Heineken 0.0’ recently. It is also preparing to launch products in the ‘craft’ and ‘variety’ beer segments.
  • 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'. Other assets to total assets at 15.4% were at the highest level since FY12.