Q3FY21 Result Update - United Spirits - ICICI Direct

United Spirits continued its strong momentum in Q3, reporting 7% QoQ improvement in volumes, led by resilience in the off-trade channels and slow pick-up in on-trade channels. The recovery is also to be seen in the context of a strong YoY comparable quarter (reported flat volumes YoY). USL also improved its gross margins during the quarter (better than both estimates and comparable QoQ, YoY), led by benign commodity costs and higher productivity. A&P expenses remained at higher levels due to continued marketing for greater on-home premises consumption and renovating core brands. Despite the rebound in performance, the management remains cautiously optimistic due to continued uncertainty in the medium term.

Valuation & Outlook

USL reported a continued reduction in its overall debt by selling its non-core assets and improved its WC position. While in the short to medium term, uncertainty continues to remain over the evolving situation in the on-trade channels and pickup in the home consumption, the longer term growth aspiration and continued premiumisation trends remain key positives for the liquor sector. USL continues to invest in increasing its brand strength and propel its Premium brands to higher share of its revenues (currently at 70%). We value the stock at ~39x FY23 EPS and revise our target price to Rs. 710 (earlier target price Rs. 650). We maintain our BUY rating.

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_UnitedSpirits_Q3FY21.pdf

Shares of UNITED SPIRITS LTD. was last trading in BSE at Rs.593.95 as compared to the previous close of Rs. 644.75. The total number of shares traded during the day was 521053 in over 10146 trades.

The stock hit an intraday high of Rs. 626.25 and intraday low of 587.75. The net turnover during the day was Rs. 312531782.

Source : Equity Bulls

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