United Spirits - IIFL - Result Update (Q3 FY14)

United Spirits (Q3 FY14) - Market Performer - CMP Rs2,364, Target Rs2,350, Downside 0.6%

- United Spirits reported muted set of results with net revenue growth of 4.8% yoy, 185bps yoy contraction in gross margin and PAT decline of 19.4% yoy

- Prestige and above segment grew at 12% (imputed net sales +15% yoy) accounting for ~28% of overall volumes which declined 3.7% yoy

- ENA prices rose Rs16/case yoy (+Rs9/case qoq) leading to adverse impact of Rs500mn in Q3-consequently gross margin declined 185bps yoy which in turn led to ~19% yoy drop in EBIDTA

- Premiumization trends notwithstanding, input cost pressures are unlikely to correct significantly in the near term which would continue to remain an overhang on margins; revise our FY14/15 estimates and retain Market Performer with 9-12 mth target of Rs2,350.

Source : Equity Bulls

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