4QFY19 standalone net sales grew 10.7% YoY (off a strong base) to INR16.3b (our est. INR16.5b). EBITDA declined 17.8% YoY to INR1.7b (our est. INR2.5b), while Adj. PAT declined 25.3% YoY to INR679m (our est. INR1.1b). Volumes are estimated to have grown at 9% with likely market share gains as well. Standalone Gross margins declined 220bp YoY (our est. -60bp) to 50.5% likely due to higher barley costs. Employee costs were up 10bp YoY to 7.6% while other expenses were up 130bp to 32.4%. Consequently, standalone EBITDA margins were down 360bp YoY to 10.5% (our est. 15.0%)....

Demand remains robust: Both the company's management and the industry expert in unison expressed the view that headwinds are largely behind for the industry and demand conditions are fairly good. The popular segment tends to witness more volatility as it tends to be slightly more price-elastic and is influenced by trends witnessed in the country liquor market. In case of prestige/deluxe and above segments, demand conditions are fairly robust and we expect the strength to continue considering the innovation agenda and marketing support for the same. Premiumisation strength is also evidenced by the fact that growth in luxury (single malt and scotch blends) is well above the growth witnessed in premium Indian Made Foreign...

Net revenue for Q3FY19 grew 11% YoY to | 2501 crore due to the strong performance in the Prestige & Above segment. Prestige & Above segment reported volume growth of 12% YoY to 11.1 mn cases while Popular segment reported volume de-grew 4% to 10.8 mn cases EBITDA margins increased 188 bps YoY to 13.9%. Though gross margins remained flat 47.3%, lower employee costs and lower advertisement expenses enabled expansion in EBITDA margin. The resultant EBITDA grew 28% YoY to | 348 crore...

United Spirits (UNSP) reported a steady growth in the prestige and above segments in 3QFY19, but the popular segment was much weaker than expected. This weakness in the popular segment contributed to around 2% miss on top-line and 4% on operating earnings. However, its important to note that its wide premium portfolio helped the company achieve growth above that of the industry. Net earnings were largely in line, supported by higher other income. Luxury and prestige segment's growth in high teens, steady excise duty trend and moderation in overheads were the key positive takeaways from the earnings. Although the short-term outlook is somewhat weaker than expected on account of impending...

Reiterate Neutral with a TP of Rs 619 (40x Dec-20E standalone EPS, plus Rs 30 for other businesses). UNSPs 3QFY19 was marginally weak on the operating front viz. volume/revenue and gross margin. However, on high costs base, adjusted EBITDA growth was healthy. UNSPs 3QFY19 volumes grew by 3.8% YoY (P&A; 12.1%, Popular -3.6%), revenue 10.5%, adj. EBITDA 48% and APAT 60%.

24 January 2019 volumes growing 3.8% YoY (est. of +9%) on a base of 14.2% decline. while Popular volumes declined 3.6% YoY (underlying Popular volumes down 2% YoY). EBITDA grew 27.7% to INR3.5b (est. Adjusted PAT grew 44.3% to INR2.1b (est.

Net revenues for Q2FY19 grew 14% YoY to | 2228 crore due to strong performance in the Popular and Prestige & Above segment as well as the benefit from low base due to the highway ban. P&A; segment reported volume growth of 15% YoY to 10.5 million cases while Popular segment reported volume growth of 5% to 9.9 million cases EBITDA margins increased 313 bps YoY to 19.4% mainly due to higher gross margins, lower employee costs and lower other expenses. The resultant EBITDA grew 36% YoY to | 432 crore...

Downgrade to Neutral with revised TP of Rs 627 (40x Sep-20E standalone EPS, plus Rs 30 for other businesses). UNSP after three consecutive weak quarters, reported robust 2QFY19 especially on margin viz. highest ever at 19.4%. Volumes grew by 10% YoY, revenue 14%, EBITDA 36% and PAT 69%. Healthy growth was led by stable operating environment, low base due to highway ban and cost optimization.

One-offs mar quarter; long term story intact Net revenues for Q1FY19 grew 13% YoY to | 2012 crore (I-direct estimate: | 2080 crore) due to the strong performance in the Prestige and Above segment as well as the benefit from lapping up the impact of the highway ban. Prestige & above segment reported volume growth of 13% YoY to 9.5 million cases while the popular segment reported volume decline of 4% to 8.7 million cases EBITDA margins increased 72 bps YoY to 9.6% (I-direct estimate:...

Reiterate SELL with a revised TP of Rs 530 @ 40x Jun-20E EPS (vs. Rs 570 earlier). We reduce our FY19-21 EBITDA estimate by 5-6% and EPS 7-9%. UNSP after blockbuster 2QFY18 reported third consecutive weak quarter especially on margin front (reported margin 9.6%, adjusted 11.3%). Revenue grew by 13% YoY, EBITDA 22% owing to low base of 1QFY18 led by highway ban. Despite management guidance of low-teen revenue growth and mid-teens margin in medium term, margin continues to struggle.

We believe increased A&P; spends is a positive and is required to drive better volume and gain shares. Normalization in ad spends and cost efficiencies can drive gradual improvement in margins in future. We reduce estimates by 5-8%. Competitive and regulatory risks prevail but post a 20% correction, valuation at 45x FY20E EPS are now in line with peers. Hence, we upgrade...

24 July 2018 to INR20.1b, with volumes growing 1% YoY (our estimate was 18.5%) on a base of 18.9% decline. while Popular volumes declined 9.4% YoY (underlying* Popular volumes down 4% YoY). EBITDA grew 34% YoY to INR2.3b (our estimate was INR3b). Adjusted PAT grew 45.6% YoY to INR1b (our estimate was INR1.6b). and productivity initiatives offset the adverse impact of inflation and GST. Underlying* gross margin expanded 266bp YoY but EBITDA margin expansion at 180bp YoY to 11.3% was restricted by high advertising expenses (+140bp YoY to 10.5%; +30% YoY on absolute basis) and other expenses (+20bp YoY to 18.

We like United Spirits' (UNSP) business given its notable position in the regulated domestic alcohol market, established brands (100+), entrenched manufacturing footprint, premiumisation focus, and potential monetisation of non-core assets (not factored in estimates). But at current valuations of 61x/ 48x FY19E/FY20E EPS, the risk-reward looks unfavourable. Also, any negative change in regulations remains a key monitorable. Maintain REDUCE with a Mar'19 target price of Rs 690 (adj. for stock split), set at 50x FY20E EPS....

The Board of Directors of United Spirits had announced sub-divison of equity shares on June 6, 2018, post receiving shareholders' approval conducted on June 3, 2018. The ratio approved is to sub-divide one existing equity share of the company with a face value of |10 per share into five equity shares of face value |2 each and to sub-divide preference shares of the company having a face value of | 100 per preference share to | 10 per preference share. The authorised share capital of the company is | 719.2 crore, divided into 274 crore equity shares of | 2 each and 17.1 crore...

Higher marketing spend, thus, is something that UNSP as Indias largest alcoholic beverages player is likely to incur in order to grow consumption levels and premiumize its portfolio. aims to achieve this via higher marketing spend (+18% in FY18), primarily toward the core brand portfolio with region-specific advertising in some cases, tie-ups like the Signature Startup Master Class and innovations like the recently launched Captain Morgan Rum all these are targeted to drive mid- teens growth in the P&A; segment. UNSP aims to do this via a host of moves, such as (a) increasing use of digital, (b) concentrated advertising at the retail store level, (c) innovative methods like online ordering through fulfilment by authorized retail outlets, (d) tie-ups with dinner reservation websites and (e) organizing events to engage the customer. For FY18, reported sales in the P&A; segment increased 3% YoY, with 4% growth on an adjusted basis.

Net revenue for Q4FY18 grew 7% YoY to | 2174 crore (I-direct estimate: | 2127 crore) due to strong performance in the prestige and above segment as well as the benefit from lapping up the impact of demonetisation and the highway ban. Prestige & above segment reported volume growth of 14% YoY to 9.7 million cases while popular segment reported a volume decline of 14% to 11.1 million cases EBITDA margins declined 48 bps YoY to 12.6% (I-direct estimate: 13.5%) mainly due to higher employee and advertisement &...

Reiterate SELL, with a TP of Rs 2,848 (40x FY20E EPS). UNSPs 4QFY18 revenue and gross profit were better than expected. Healthy volume growth of 16% in P&A; segment led to outperformance. However, this was offset by increased employee costs (+53%) and A&P; spends (34%).

25 May 2018 to INR21.7b (est. of INR20.1b), with a 2% YoY decline in volumes (est. of -9%) on a base of an 8.2% decline. Underlying* net sales grew 9% YoY. Underlying* net sales of Prestige & Above were up 14% and of Popular rose 2% YoY in 4QFY18. to 48.8%, led by price increases, productivity initiatives, a favorable mix and operating model changes, offsetting the adverse impact of GST. Underlying* gross margin expanded 260bp YoY. High operating costs as % of sales advertising expenses up 200bp YoY to 10.2%, staff costs up 250bp YoY to 8.

Long term story intact despite near-term hiccups Gross revenues grew 1% YoY (up 15% QoQ) to | 7137.3 crore (I-direct estimate: | 6780 crore). Higher excise duty (68% vs. 65% in Q2FY17) continued to impact net revenues that de-grew 8% YoY (up 16% QoQ) to | 2263.3 crore (I-direct estimate: | 2171 crore). Excluding one-off impact on back of operational model changes, net sales de-grew 2% Total volumes for quarter were in line with our estimates with 14% YoY de-growth (up 17% QoQ) to 21.1 million (mn) cases. Volumes for...