United Spirits Ltd. share price target

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...

Reiterate SELL, with a TP of Rs 2,540 (40x Dec-19E EPS). United Spirits (UNSP) post stellar 2QFY18 results (stock price up 66%) reported weak 3QFY18. This was led by feeble revenues (-2% YoY) due to distribution model change and notably high ad & promotions spend (+27% YoY, +79% QoQ).

UNSP posted standalone net sales decline of 7.8% YoY to INR22.6b, with underlying net sales declining by 2% YoY. Underlying net sales for Prestige & Above segment (P&A; 64% of net sales) were down by 1% YoY and for Popular segment (36% of net sales) were down by 2% YoY. Volumes declined 3% and 22% YoY for P&A and Popular, respectively. Gross margin expanded 530bp YoY(-20bp QoQ) to 47.4%, led by price increases, productivity initiatives and operating model changes. Ad spend behind brands was up sharply by 320bp YoY to 11.5% and other expenses rose 210bp YoY. This led to flat EBITDA margin YoY. Excluding the one-off impact, the gross margin expanded 370bp, while the EBITDA margin shrunk 30bp YoY

Gross revenues grew 3% YoY (up 7% QoQ) to | 6214.6 crore (I-direct estimate: | 6481.2 crore). Higher excise duty (69% vs. 66% in Q2FY17) continue to impact net revenues, which de-grew 4% YoY (up 10% QoQ) to | 1951.3 crore (I-direct estimate: | 2009.2 crore). Excluding one-off impact, net sales grew 4% Total volumes for the quarter de-grew 16% YoY (up 3% QoQ) to 18.5 million cases. Volumes for prestige & above (P&A;) segment grew 3% YoY (up 8% QoQ) to 9.1 million cases. However, volumes for regular...

Reiterate SELL, with a TP of Rs 2,440 (40x Sep-19E EPS). United Spirits (UNSP) reported upbeat numbers in 2QFY18. Adjusted for operating model changes, revenue grew 4% YoY, led by price increases and changes in the mix. EBITDA grew by 37% (426bps margin expansion to 14.2%), led by gross margin expansion despite GST headwinds and cost optimisation (employee cost down 22% YoY). PAT was up 79%.