MOSL: UNITED BREWERIES (Buy)-Improving operating environment reinforces outlook
United Breweries: Improving operating environment reinforces outlook
(UBBL IN, Mkt Cap USD4.8b, CMP INR1184, TP INR1480, 25% Upside, Buy)
- UBBL's sales grew 32% YoY to INR14.7b (est. of INR13.7b) in 4QFY18, off a weak base. Volumes grew strongly by 24% YoY (industry vols grew 22%), with continued market share gains. Notably, growth was achieved in 4Q, despite no supply in Bengal due to the lack of clarity on the new excise structure.
- Gross margin expanded 150bp YoY to 52.8% (benefiting from a favorable state mix and price hikes taken in the year). Strong sales growth meant that employee costs as a percentage of sales were down 50bp YoY to 7.5% and other expenses were down 300bp to 31.2%. Consequently, the EBITDA margin expanded 510bp YoY to 14.2% (est. of 13.1%). EBITDA more than doubled YoY to INR2.1b (est. of INR1.8b). Depreciation missed estimate, but the tax rate of 33.6% came in higher than expected. Despite this, the strong operating performance ensured PAT of INR909m (31% beat) in 4QFY18.
- FY18 performance: Net sales rose 18.6% to INR56.2b, led by 10% volume growth, ahead of industry growth of 7%. This is the second consecutive year of market share gain for UBBL. EBITDA rose 40.5% YoY to INR9b, with the margin up 250bp YoY to 16%. PAT was up 71.6% YoY to INR3.9b.
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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