MOSL: UNITED SPIRITS (Buy)-Subdued sales-significant beat on EBITDA margins
UNITED SPIRITS: Subdued sales; significant beat on EBITDA margins
(UNSP IN, Mkt Cap USD6.4b, CMP INR627, TP INR725, 16% Upside, Buy)
- Standalone net sales grew 3.2% YoY to INR22.9b (v/s est. INR23.7b), benefiting from the second tranche of bulk Scotch inventory sales. Sales growth, excluding this one-off benefit was almost flat, primarily impacted by (a) slowdown in consumer demand, (b) liquidity challenges in certain markets, and (c) temporary supply chain disruption in the company's Scotch portfolio. Reported volumes growth stood at 1% YoY (v/s est. +2.6%) while underlying volumes were up 1%. Prestige & above volumes grew 2.9% YoY while Popular volumes were down 1% YoY. EBITDA declined 6.2% to INR4.2b (v/s est. INR3.8b) while underlying EBITDA was down 12% YoY. PBT declined 14% YoY to INR3.3b (v/s est. INR3.05b). Adj. PAT was down 13.2% to INR2.2b (v/s est. INR2.04b) as benefit from corporate tax cut was offset by one-time write-down of DTA.
- Gross margin contracted 530bp YoY to 45% while reported EBITDA margin stood at 18.1% (est. 15.9% and only down 180 bp YoY despite huge base ) as other expenses dipped 200bp YoY and ad spends were down 150bp
- Concall highlights: (1) Poor quarter due to mix (particularly Scotch) was a one-off leading to steeper gross margin decline YoY; (2) There was a small increase in working capital, specifically on debtor days as money was stuck toward end-2Q due to a spate of bank holidays; (3) For P&A category, UNSP's ad-spends were in double-digits during the quarter.
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.
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