United Spirits - Q2FY21 Result Update - ICICI Direct

USL reported results with a faster than expected recovery QoQ in volumes (leading to mere 3.4% YoY decline in volumes), in spite of the continued closure of on-trade channels in various states, higher taxation post-Covid scenario and also contraction in the business in Andhra Pradesh. The recovery also saw higher growth in the P&A segment (up 116% QoQ and flat YoY) compared to the popular segment (up 90% QoQ but down 7% YoY). The company also increased its A&P expenses during the quarter, to launch its two renovated core brands (McDowell's No 1 and Royal Challenge). Going ahead, the company remains cautiously optimistic on opening of on-trade channels and festive season (but social distancing norms could negatively affect volumes YoY).

Valuation & Outlook

On the balance sheet front, the management has improved its WC position, thereby lowering net debt in H1FY21 by Rs. 780 crore (short term debt) and also, improved its CFO generation (2.5% yield for H1 CF). Going ahead, pick-up in consumption due to festive season and opening of on-trade channels remain key triggers for the stock, along with long term trend of home delivery of alcohol. The management has displayed discipline and prudence in addressing the evolving consumer needs. We value the stock at ~40x FY22 EPS and maintain our target price of Rs. 650 with a BUY rating.

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_UnitedSpirits_Q2FY21.pdf

Shares of UNITED SPIRITS LTD. was last trading in BSE at Rs.534.35 as compared to the previous close of Rs. 509.95. The total number of shares traded during the day was 313198 in over 9258 trades.

The stock hit an intraday high of Rs. 540.75 and intraday low of 509.95. The net turnover during the day was Rs. 165744442.

Source : Equity Bulls

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