United Spirits - 2QFY2013 Result Update - Angel Broking

For 2QFY2013, United Spirits (USL) posted a standalone top-line growth of 24.0% yoy to Rs.2,221cr (Rs.1,791cr in 2QFY2012), aided by one time sale amounting to Rs.315cr of bulk spirit stocks. Adjusted for the same, the sales growth stood at 6.4%, below our growth estimate of 8.9%. The PAT declined by 73.4% yoy due to higher interest costs (up by Rs.26cr on a yoy basis), forex loss of Rs.34cr (vs Rs.39cr gain in 2QFY2013) with respect to loans to overseas subsidiaries and lower other income.

Key highlights for the quarter: Sales growth (adjusted for bulk spirit) was driven by better realization as volume remained flat at 28.4 million cases (28.7 million cases in 2QFY2012). The management claimed that certain restrictions on its products resulted in continued weak sales in the key state of Tamil Nadu, despite the good demand for its products. Sales volume in West Bengal too was down by 3% yoy due to higher duties imposed in the state a year back. Although the reported OPM fell by 290bp yoy, when adjusted for bulk spirit sale, it was higher by 150bp yoy. OPM expansion was on account of 14% yoy growth in the Prestige and Above segments and price hikes taken by the company.

Outlook and valuation: We expect USL's bottom-line to grow at a CAGR of 103.4% over FY2012-14E due to the lower interest costs on account of substantial reduction in debts post the UBH-Diageo deal. At the CMP, the stock is trading expensively at 38.9x FY2014 EPS; we maintain a Neutral view on the stock.

Source : Equity Bulls

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