MOSL: UNITED BREWERIES (Buy)-Growing profitably and ahead of market
United Breweries: Growing profitably and ahead of market; Maintain Buy
(UBBL IN, Mkt Cap USD4.8b, CMP INR1308, TP INR1730, 32% Upside, Buy)
Key takeaways from United Breweries' (UBL) annual report and management meet:
- The beer industry is expected to grow by 7.6% CAGR in terms of volume over FY18-24, according to CISION. UBL expects to beat industry growth over this period. Management places growth at a premium.
- The premium segment grew at a rapid pace for UBL in FY18-with Heineken growing 30%, Kingfisher Ultra growing by 59%, and Kingfisher Ultra Max growing by 80% YoY. With a slew of other brand launches at various levels in the premium segment over the past 16 months, UBL is poised for healthy profitability growth. Kingfisher Storm already has a 3-5% market share within a year of its launch in four states.
- The company is likely to enter into the non-alcoholic beer segment in 3QFY19 and introduce its craft beer offering in 4QFY19.
- Selling and distribution costs are coming down for the company, as Carlsberg is focusing more on profitability than on promotions. After the blip in FY17, there has been a steady improvement in FY18-in both working capital and fixed asset turns, which saw highest ever EBITDA and Net margins, as well as highest ever ROE and ROCEs.
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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