United Spirits - Q2FY21 First Cut - ICICI Securities

(CMP - Rs. 510, Market Cap - Rs. 37080 crore)

United Spirits reported strong set of numbers that were above I-direct estimates on all fronts, in-spite of the continued closure of on-trade channels in various states and contraction of business in the state of Andhra Pradesh. The company has also repaid Rs. 780 crore of debt in H1FY21 and the current net debt position stands at Rs. 1293 crore (vs 2072 crore in FY20)

Q2FY21 Earnings Summary

- Net revenues more than doubled QoQ, which led to mere 7% YoY decline to Rs. 2146 crore (I-direct estimate: Rs. 1854 crore). Adjusting for the one-time bulk scotch sales in base quarter, the net revenues declined 3.4%

- Prestige & Above segment reported flat growth in volume at 10.8 million cases (I-direct estimate: 8.6 million cases) while Popular segment reported volume de-growth of 7% to 9.1 million cases (I-direct estimate: 7.8 million cases). Revenues for prestige and above segment and popular segment were up 1% and down 13% respectively to Rs. 1518 crore and Rs. 614 crore respectively.

- EBITDA Margins contracted 553 bps YoY to 12.6% (I-direct estimate: 10%) despite a better product mix, mainly due to 280 bps contraction in gross margins led by one-time inventory provision in AP (110 bps impact) and decline in South franchisee business. Higher A&P expense to support renovated roll-out of two core brands McDowell's No.1 and Royal Challenge Whisky also negatively impacted EBITDA margins. Subsequently, the resultant EBITDA de-grew 35% YoY to Rs. 270 crore but came above I-direct estimate of Rs. 185 crore (mainly due to higher operating leverage and lower other expense)

- Subsequently, PAT de-grew 43% to Rs. 129 crore but came above I-direct estimate of Rs. 58 crore, as strong operational performance was further supported by higher than estimated other income and lower depreciation

We will be coming out with a detailed report post management conference call.

Shares of UNITED SPIRITS LTD. was last trading in BSE at Rs.510.1 as compared to the previous close of Rs. 509.85. The total number of shares traded during the day was 42934 in over 1913 trades.

The stock hit an intraday high of Rs. 515 and intraday low of 508.6. The net turnover during the day was Rs. 21969407.

Source : Equity Bulls

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