United Breweries Ltd. share price target

Management stated on the call that Apr20 sales were negligible, May20 sales were down 6070% YoY, and Jun20 sales (while relatively better than May) are a long way off from normal. Moreover, management further stated home delivery is unlikely to have a significantly positive impact in the current year due to models being in the early stages. Additionally, the surge witnessed in demand in off-trade outlets in the first few days following the resumption of operations in a few states has tapered off significantly. It also increasingly appears that bars, restaurants, and pubs (20% of sales) would re-open only in 2HFY21. expansion to a combination of positive price/mix and more stable input costs. Employee costs were up 140bp YoY to 9% of sales and other expenses 20bp YoY to 32.6%. Consequently, standalone EBITDA margins for 4QFY20 were In FY20, sales/EBITDA/PAT registered growth of +0.5%/-23.1%/-24% YoY.

8 February 2020 United Breweries' (UBBL) 7% volume decline in 3QFY20 was a disappointment; however, margin impact was restricted. Thus, despite EBITDA declining 10.6% YoY, it was in line. Rich valuations, the CCI price fixing issue overhang and uncertainty over it further worsening in Andhra Pradesh (AP) due to prohibition fears prevent us from turning constructive on the stock. EBITDA declined 10.6% YoY to INR2.2b (v/s est. PBT declined 20% YoY to INR1.4b (v/s est.

Volumes stumble in Q3 but expected to regain momentum During 9MFY20, UBL grew its volumes by 2% against H1 growth at 6%, due to several factors such as an economic slowdown, supply chain disruption due to extra rainfall in few states (in October) and new excise regime in AP. However, with stabilisation of the Andhra pipeline and expected price hikes in few other states, the revenue profile is expected to pick up. We expect the market share for UBL to move a little higher to 53% of the beer industry in FY21E and FY22E. Further, the management expects single digit growth in...

8 November 2019 to INR15.8b (v/s est. EBITDA declined 39.5% YoY to INR1.9b (v/s est. PBT declined 53.7% to INR1.2b (v/s est.

Volumes continue to stay on stronger trajectory During H1, UB grew its volumes by 6% (ahead of the industry) resulting in a capture of 2-3% market share (from its existing ~51-52% MS). Although floods and elections continued to play spoilsport in key geographies like Maharashtra, Karnataka and Telangana, the volume gain in other key geographies led to a favourable outcome. We expect the market share of UBL to move up a little higher to 53% of the beer industry in FY20. Further,...

The company is also a major beneficiary of the recent corporate tax rate cut (FY19 tax rate ~36%) which would improve its profitability and increase the free cash flow generation. The company is expected to utilise the incremental free cash flows towards higher brand investments and...

Margins shrink significantly, prompts sharp earnings cut Standalone net sales were up 9.8% YoY to INR20.5b (our estimate: INR20.4b) in 1QFY20. EBITDA declined 17.8% YoY to INR3.3b (our estimate: INR3.8b), while adj. PAT was down 25.9% YoY to INR1.6b (our estimate: INR2b). Volumes were up 5% YoY. There was no comment on market share, which is unusual. According to the press release, UBBL faced challenges in the form of restricted...

Refer to important disclosures at the end of this report Steady growth despite headwinds UBL's recent underperformance despite steady volume growth and market share gains provides an attractive opportunity, in our view. Channel checks suggest steady volume trends after the election impact in April, which was temporary and restricted to few states. Margin pressures witnessed in 4Q should recede with pricing actions and better input sourcing (barley imports and old bottles). We expect lower gross margins in FY20, but...

FY19 sees continued momentum in volume growth In FY19, volumes grew 13% YoY (on a base of 10%), mainly due to growth across all key markets except West Bengal and UP. All southern markets saw double digit volume growth (except Karnataka, which grew in single digits), whereas all key markets in west grew in single digits (except rest of Maharashtra, which grew double digits). Other significant markets were mainly Odisha, Jharkhand (in East India), Rajasthan and Haryana (in North). The market share for UBL has remained stable at 51-52% of the beer...