MOSL: UNITED SPIRITS (Downgrade to Neutral)-Emerging headwinds; fair valuations
UNITED SPIRITS: Emerging headwinds; fair valuations – downgrade to Neutral
(UNSP IN, Mkt Cap USD9.4b, CMP INR958, TP INR1025, 7% Upside, Downgrade to Neutral)
United Spirits (UNSP) has been the second best performer in our Coverage Universe since our in Jan’21 (only marginally below Titan), with the stock price moving up nearly 60% since. It has also comfortably outperformed its other largecap alcobev peer, UBBL, since our upgrade. a) The as well as b) the ongoing strategic review of the Popular portfolio (to be concluded by Dec’21) offer scope for sustained double-digit volume-led topline growth as well as sharper margin improvements going forward. However, to a large extent, these are already a part of our forecasts. Thus, valuations at 62.3x on a standalone basis leave little room for an upside. Even when adjusted for the potential valuation of ~USD1b of Royal Challengers Bangalore (RCB), the P/E multiple is not cheap at ~56.5x FY23E EPS. These valuations may appear cheaper than the other discretionary stocks under our coverage. Nevertheless, the government-dependent nature of the Alcobev sector with regard to procurement, pricing, distribution, and receivables prevents us from increasing our target multiples for UNSP. We maintain our forecasts and TP and downgrade to Neutral.
United Spirits Limited is a spirits company engaged in the business of manufacture, purchase and sale of alcoholic beverages. The Company operates through two segments: India and Outside India. The India segment is engaged in the business of manufacture, purchase and sale of Beverage Alcohol (Spirits and Wines), including through Tie-up units/brand franchisees within India. The Outside India segment is engaged in the business of manufacture, purchase and sale of Beverage Alcohol (Spirits and Wines), including through Tie-up units/brand franchisees outside India. Its product portfolio includes whisky, vodka and rum segments, and caters to various consumers through luxury, premium, prestige and popular spirits categories. Its brand portfolio includes McDowell's No.1, Royal Challenge, Signature and Antiquity. It has over 80 (74 excluding Royalty and Franchise units) manufacturing facilities spread across approximately 20 states and over three union territories in India.
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.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.