MOSL: UNITED BREWERIES (Buy)-Beer industry’s earnings momentum appears strong
United Breweries: Beer industry’s earnings momentum appears strong; Implies positive rub-off on United Breweries’ prospects
(UBBL IN, Mkt Cap USD5.1b, CMP INR1381, TP INR1635, 19% Upside, Buy)
Earlier this week, we pored over the operating performance of Carlsberg in India through its annual report and quarterly release. From the perspective of volume growth and profitability, the momentum in the beer industry seems strong, which augurs well for United Breweries as well.
Good overall operating performance in Carlsberg's India business
- Carlsberg's India business had an excellent year after a challenging 2017 (impacted by the highway ban, GST and tax increases). Overall volumes grew 19% YoY and price/mix growth was +7% YoY.
- Carlsberg's main brands in India - 'Tuborg' and 'Carlsberg', reported a volume growth of 17% and 31% YoY, respectively, in CY18.
- The improvement in price/mix was driven by robust growth of the Carlsberg brand and improved pricing (we believe pricing refers to the 10% price increase grant in May'18 in Telangana).
- Profitability has improved considerably due to volume growth, positive price/mix and supply chain efficiencies, following the opening of Carlsberg's Karnataka brewery. The India business reported an organic operating profit growth of 131% YoY in 2018.
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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