EUR 120.00 For Business Accounts Only

MOSL: UNITED BREWERIES (Buy)-Growth traction robust-optimistic outlook sans some near-term overhangs

United Breweries: Growth traction robust; optimistic outlook sans some near-term overhangs

(UBBL IN, Mkt Cap USD5.2b, CMP INR1404, TP INR1660, 18% Upside, Buy)

 

• Net sales grew 21% YoY off a high base to INR14.5b (our estimate: INR14.1b) in 3QFY19. Volumes grew by a healthy 16% YoY with market share gains (management cited achievement of market-leading volume growth). EBITDA increased 62.4% YoY to INR2.5b (our estimate: INR2.1b). Adj. PAT grew 130.4% YoY to INR1.1b (our estimate: INR908m). Sales and EBITDA growth for the base quarter (3QFY18) was 17.1% and 19.3%, respectively.
• Gross margin expanded by 100bp YoY to 53.3%. Employee costs declined 30bp YoY to 7.6% of sales, while other expenses were down 300bp YoY to 28.6%. Consequently, EBITDA margin expanded 440bp YoY to 17.1% (our estimate: 15.0%) - the highest third-quarter margin in the company's history.
• Strong operating performance led to PAT growth of 130.4% YoY, significantly higher than our estimate of +91.6% YoY. Interest costs reduced sharply by ~50% owing to debt reduction. If not for the tax rate at 38.4% for the quarter, the PAT beat would have been even higher.
• 9MFY19 performance: Net sales increased by 16.5% YoY, EBITDA by 39.5% YoY and PAT by 63.3% YoY. Gross margin improved by 140bp YoY to 54.3% and EBITDA margin by 330bp YoY to 20.0%. Notably, strong PAT growth in 9MFY19 comes after impressive 71.6% growth for full-year FY18.