United Breweries Ltd. share price target

The penalty comes on the back of a detailed probe ordered four years ago with regard to alleged cartelization and price fixing by all the three major Beer players that came to light when AB InBev (after its global acquisition of SABMiller) came to acquire the business of SABMiller India. The period of cartelization is considered to be from CY07 to at least 10th Oct'18, with CIPL joining in from CY12, and the All India Brewers Association (AIBA) serving as a platform facilitating such cartelization since CY13. The companies were found to have exchanged commercially sensitive...

Facing multiple headwinds in FY21, Q4 results reflected the inherent strength in the UBL brand portfolio and beer sector, in general, to spring back to growth (capture lost market share from liquor), when situation normalises. It stays an underpenetrated segment (12% market share in alcohol consumed), a preferred choice of ready to drink product for the youth and, thus, has long term growth potential (in a landscape historically dominated by liquor). We maintain BUY rating on the stock with a revised...

Global trends catching on faster in emerging markets: Technology is accelerating global trends in the developing markets. The management believes global trends toward lower/no alcohol products could be at play in India as well....

UBL continues to have a robust balance sheet with virtually debt free position (net cash of | 97 crore) by building up a stronger WC position, cost control measures and lowered capex requirement. It also has dominant 5253% market share in the beer sector. The management has also displayed discipline and prudence when dealing with evolving customer needs via broad portfolio and wide reach. Being an underpenetrated segment (per capita ~2 litre consumption) and a youth centric status of ready to drink social drink, enables the sector to have long term growth potential. We...

United Breweries (UBBL)'s 2Q results were weak with 48%/42.9% YoY volume/sales decline and 79%/96.5% YoY EBITDA/PAT decline although better than our expectations. These numbers are also starkly below the ~3%/6% volume/sales decline reported by Alcobev peer United Spirits (UNSP) last week. This once again highlights that the more in-home consumption dominates, spirits consumption would do better. This trend is likely to continue over the next few quarters as well. The stock has been a significant underperformer in the past six months (v/s...

Volumes were marred heavily by no supplies in Q1 and excise hikes (that led to loss of share to liquor players). Q2 saw the situation ease up, with the state wise lifting of lockdown (resumption of supplies) and lowered excise burden in AP and Odisha. West Bengal has also lowered its beer prices, which is expected to boost the fortunes of beer in the state (after a 90% decline in the east since excise hike in April). Also, certain key markets such as Karnataka, Tamil Nadu and Goa posted YoY growth in volumes in September. With an expectation of a strong festive season and opening up...

Although half of the quarter saw no supplies, the situation was further escalated by the taxation impact of various states. However, June saw 57% de-growth in volumes compared to 77% for the quarter, which also saw reduction in taxation levels by several states. West Bengal, Odisha and Andhra excise hike was more impactful than other states (90% volume decline in the east). UP saw decline of mere 46%. However, with further opening up of the economy, we expect the situation to normalise in the medium to long term. The company continues to remain virtually debt-free...

United Breweries (UBL's) Q1FY21 was lackluster with 77% volume decline as peak season was severely impacted by pandemic. Volume decline in Jun'20 too was 57%. Revenue/GP/EBITDA/APAT declined by 75/77/129/162% YoY. Gross margin declined by 370/424 bps YoY/QoQ. A steep 62% decline in other expenses YoY was the silver lining. After healthy operating performance over FY17-19, for second consecutive year UBLs performance is expected to be subdued due to loss of key season and steep excise increases by state government....

17 August 2020 United Breweries (UBBL)s results were worse than our expectations. Its in various urban centers thus far in 2QFY21, (c) no repeal of excise duty increase in the majority of the states (which saw a steep excise increase in May), and (d) the continued likelihood of closure of on-trade sales for a few more months. As highlighted in our Alcobev downgrade in May20, we expect FY20 FY22 to be lost years for alcobev players, which are severely affected by a weak demand environment in FY21. Moreover, recovery in FY22 is also threatening both net sales growth and profitability for the next few quarters and (b) the risk of weak state finances leading to delay in payments, thereby increasing receivables. EBITDA loss stood at INR957m (v/s est. INR750m loss and EBITDA profit of INR3.3b in 1QFY20). PBT loss stood at INR1.5b (in-line) v/s PBT profit of INR2.6b in 1QFY20.

UBL's FY20 annual report highlights the long-term beer industry potential and of beer as a preferred choice of consumption among young Indians. But, regulatory uncertainties and steep increase in taxation remains a key hindrance. Beer industry declined by 11% YoY in FY20 vs. 4% for UBL in our view. UBL's market share stood at ~52%. FY21 will be another weak year on account of Covid and loss of key season. Non-alcoholic beverage remains a key focus area with company targeting to double business every year for next three years. In respect of CCI case on alleged pricefixation, UBL needs to file their reply to the DG-CCI report and after...