Mutual Funds Commodities Research Tax Planning IPO Our Team Contact Us    

| More

Maintain ADD on United Spirits - Weak show; gradual recovery expected - HDFC Securities

Posted On: 2020-07-29 22:16:39

Mr. Varun Lohchab, Head Institutional Research & Mr. Naveen Trivedi, Institutional Research Analyst, HDFC Securities.

United Spirits posted a disappointing set of numbers as the revenue declined 54% YoY and there was an EBITDA loss of Rs 776mn. IMFL industry saw >50% decline in volume due to COVID-led lockdown. Recovery in May and June was strong, although localised lockdowns have slowed down the rate of recovery in July. The downtrading trend was not significant, and the P&A mix is expected to improve in the ensuing quarters. GM pressure (>500bps dip YoY) was on account of (1) low franchise income (160bps impact), (2) inventory-led provision (150bps impact), (3) cost inflation (150bps impact), (4) weak P&A volumes, and (5) adverse mix in popular. Going forward, we expect lower impact of these headwinds, and the company may achieve 44-45% gross margin. Improvement in the balance sheet was encouraging as collections were healthy in 1Q. Owing to the big miss in 1Q and slower recovery in P&A, we cut our EPS estimate by 34/4/4% for FY21/FY22/FY23. We value UNSP at 42x P/E on Jun-22E EPS and derive a target price of Rs 569. Maintain ADD.

Weak volumes and realisation: Revenue declined by 54% YoY (+10% in 1QFY20 and -11% in 4QFY20). P&A saw value/volume decline of 52% YoY while popular saw value/volume decline of 51/47% YoY. However, premium products and new launches continued to perform well.

Loss in EBITDA: Gross margin fell sharply by 567bps YoY to 41.7% (-291bps in 1QFY20 and -400bps in 4QFY20) vs estimated 44.8%. Employee/A&P/other expenses declined 12/70/22% YoY. The company recorded a loss of Rs 776mn at the EBTIDA level. The loss at the APAT level fell to Rs 1,403mn vs an expected profit of Rs 535mn.

Call takeaways: (1) All plants of the company are now fully operational; (2) 80-85% shops were operational within a month of states allowing the sale of liquor; (3) West Bengal and Orissa performed better than Maharashtra as Swiggy, Zomato were allowed to deliver liquor; (4) franchise income in the normal course is Rs 1.6-2bn per year. The company expects it to be ~40% lower going forward, (5) ENA is likely to remain stable and support gross margin, going forward, and (6) the company took a price hike in 7-8 states.

Shares of UNITED SPIRITS LTD. was last trading in BSE at Rs.577.5 as compared to the previous close of Rs. 585.45. The total number of shares traded during the day was 94219 in over 4189 trades.

The stock hit an intraday high of Rs. 591.4 and intraday low of 575.1. The net turnover during the day was Rs. 54834909.

Source: Equity Bulls

Click here to send ur comments or to

Disclaimer:The article above is a gist / extract of the original report prepared by the research firm / brokerage firm. This article is not to be considered as an offer to sell or a solicitation to buy any securities. This article is meant for general information only., its employees or owners or the research firms, its employees or owners won't be responsible for any liability that may arise from information, errors or omissions in these articles. or its employees or owners / the research firms or its employees or clients or owners may from time to time hold positions in securities referred in this article. For detailed research reports, please contact the concerned research firm directly.

Other Headlines:

HeidelbergCement India - Play on better priced Central India; initiate with BUY - ICICI Securities

Healthcare - Diagnostics: Multiple tailwinds likely to emerge - ICICI Securities

Mazagon Dock Shipbuilders Ltd - IPO Review - ICICI Securities

Persistent Systems - 28th September 2020 - Angel Broking

Canara Bank - 28th September 2020 - Angel Broking

Subscribe to UTI Asset Management Company Limited - IPO Note - Angel Broking

Multiplex Sector - Mr. Jyoti Roy - DVP - Equity Strategist, Angel Broking Ltd

Sale of Sequent stake to Strides Pharma - Angel Broking

Subscribe to Mazagon Dock Shipbuilders Ltd - IPO Note - Angel Broking

JSW Energy - First big renewable step - ICICI Securities

V-MART Retail - Best play in value fashion segment; initiating with BUY - ICICI Securities

Gas sector - New winners and losers likely on policy changes in gas sector - ICICI Securities

Mazagon Dock Shipbuilders Limited - IPO Note - Geojit

UTI Asset Management Company Limited - IPO Note - Geojit

Preview on RBI Monetary Policy - Oct 2020 - Shanti Ekambaram

Rollover Report for September 2020 - October 2020: Angel Broking

Covid Recovery Pulse - Sep 25, 2020 - ICICI Securities

Quick Comment - Suven Pharmaceuticals - ICICI Securities

Derivatives Strategy - Sep 25, 2020 - Positional Option - ICICI Securities

Gladiator Stocks - Ramco Cement - ICICI Securities

IPO Review - UTI Asset Management Company - ICICI Securities

Stock of the Day - Zensar Technologies - Sep 25, 2020 - Angel Broking

Accenture Q4FY2020 Result - Angel Broking

Granules India receives ANDA approval - Angel Broking

Zydus Cadila receives US FDA approval - Angel Broking

Cipla - ANDA approval - Mr. Yash Gupta - Equity Research Associate, Angel Broking Ltd

Mindspace REIT - Mr. Yash Gupta - Equity Research Associate, Angel Broking Ltd

UTI AMC - IPO - Mr. Jaikishan Parmar - Sr. Equity Research Analyst, Angel Broking Ltd

Balkrishna Industries - Growth momentum continues - ICICI Securities

Rollover Analysis (September 25): Nifty starts October series with low OI amid high volatility

Derivatives View (September 25): Sell Bank Nifty in range of 20650-20750 - ICICI Securities

Rollover Analysis - Sept 20: Selling climax on expiry as markets crumble - YES Securities

Zydus Wellness - Leadership in niche categories; initiate at BUY - ICICI Securities

Power - Setting the stage - ICICI Securities

Company Update - Elgi Equipments - ICICI Securities

Nano Nivesh - The Anup Engineering - ICICI Securities

RBI OMO announcement of Rs. 10000 crore - Angel Broking

TCS deal win - Sep 24, 2020 - Angel Broking

View on Pre-Monetary Policy by Upasna Bhardwaj, Senior Economist at Kotak Mahindra Bank

US FDA approval to Zydus Cadila - Angel Broking

HDFC Securities Institutional Research Desk: Cement Sector Thematic - Spotting the sweet spot

Bharat Forge - Expectation hurdle remains steep - ICICI Securities


Mutual Fund Review - September, 2020 - ICICI Securities

UTI AMC announces IPO date - Angel Broking

Asian Paints - Mr. Amarjeet Maurya - AVP - Mid Caps, Angel Broking Ltd

Britannia Industries - Mr. Amarjeet Maurya - AVP - Mid Caps, Angel Broking Ltd

Hexaware Technologies (Not Rated): Hexaware accepts 475/share as final delisting price - ICICI Securities

CAMS IPO - Day 2 Subscription - Angel Boking

Chemcon Speciality Chemicals - IPO subscribed 12.62 times on second day - Angel Broking

Website Created & Maintained by : Chennai Scripts
West Mambalam, Chennai - 600 033,
Tamil Nadu, India

disclaimer copyright © 2005 - 2019