United Breweries Ltd. share price target

Market share gains, the lower base (owing to elections) and sustained premiumisation drove an 11% rise in United Breweries’ volumes in Q1 (above the Street’s 5-7% estimate).

United Breweries (UBBL) delivered strong revenue growth of 16% YoY (est. 10%) in 1QFY26. Volume growth was 11% YoY (est. 4%, 5% in 4Q, 6% in FY25), aided by share gain and a low base from the election-impacted
quarter last year.

United Breweries (UBBL) delivered revenue growth of 9% YoY (est. 10%) in 4QFY25. Volume growth was 5% YoY (est. 8%). The Premium portfolio continued to deliver strong performance, posting 24% YoY growth in 4Q (32% in FY25).

UB will hold share in non-premium, grow in premium. Double digit sales growth and 340bps EBITDA margin expansion between FY25-FY27

United Breweries (UBBL) delivered revenue growth of 10% YoY (est. 12%), aided by policy changes in Andhra Pradesh (AP). Volume growth was 8% YoY (est. 6%).

Telangana (15% of UB’s revenue) announced a 15% price hike for beer, marking the first hike since FY20. This and strong seasonal demand (on a lower base), cost-saving steps and consistent capability building efforts augur well for the future.

We attended United Breweries’ first analyst meet and plant visit on Thursday. The former involved a panel discussion and Q&As with senior management, incl. Vivek Gupta (CEO & MD), Vikram Bahl (CMO), Wiggert Deelen (head, supply chain) and Jorn Kirsten (CFO).

MD and CEO Mr. Vivek Gupta, who joined UBBL a year ago, emphasized the need to refocus on consumers, who have been overlooked due to excessive government intervention.

United Breweries (UBBL) delivered a revenue growth of 9% YoY (est. 15%). Volume growth was slow at 5% YoY (est. 11%) despite season benefits.

Subsequently, the company reported a PAT of |164 crore (vs PAT before exceptional items of |160 crore in Q4FY21) and came above I-direct estimate of | 91 crore. PAT after exceptional item stood at | 98 crore What should investors do? The company saw highest ever volume in March, 2022 and expects the momentum to continue in Q1FY23 (peak season for breweries). Also, UBL is expected to see normalised peak quarter after a span of three years. Although near term challenges remain (barley prices which make up for 15% input costs for UBL, is up 70% YoY, high single digit inflation in glass), the management...

However, PAT grew 39% to | 100 crore, as EBITDA was supported by lower depreciation, interest expense and higher other income What should investors do? UBL's market share has grown from 51-52% prepandemic to 53-54% currently. An | 800 crore bank balance, strong supply chain (has weathered pandemic better than other players and, hence, ~200 bps market share growth), strong return ratios (RoIC above 25% in FY24E) and a long premiumisation leg to play on (currently premiumisation at mere high single digit),...

estimates; however, sales were lower than expectations because of a higher-than-anticipated impact of restrictions in key cities towards the end of the quarter as well as a sequentially weaker mix. Commodity costs are on a rising trend and on-trade being impacted in 4Q...

With the recent run-up in the stock and revival in the beer sector still a few quarters away, we maintain our HOLD stance Target Price & Valuation: We value the stock at | 1700 i.e. 64x P/E on FY23E EPS....

UBL and the beer industry in general, has been facing unfavourable macro-climate since 3 years (Q1 disruption). With still stressed beer sales, UBL would have to shore up further debt (|115 cr LTD in FY21) to deposit the penalty. The scenario if undertaken, is expected to create near and medium term challenges for the company. UBL can however, appeal to the Supreme Court of India within 60 days...