United Spirits - Motilal Oswal

UNITED SPIRITS 3QFY11: Marginally below estimates; volume growth 14%; comparable margins expand 50bp

United Spirits 3QFY11 results are below estimates. Volumes have grown at 14% (est 15.5%), sales have grown by 17.6% to Rs15.8b (est Rs16.5b)

Gross margin has declined 70bp to 42.7%; EBIDTA margin has expanded 50bp to 16.9% even after providing for initial brand launch expenses of Rs200m.

Interest burden at Rs960m is lower than est of Rs1.1b; other income has declined from Rs85m to a negative 16m due to higher forex losses.

Adj PAT has grown by 7% to Rs1.04b (est Rs1.15b). Staff costs and overheads have declined by 1% to Rs2.4b. EBIDTA grew 20% to Rs2.67b (est 2.79b)

Whyte and Mackay have reported 3Q sales of 97.8m GBP v/s GBP146.3m. Decline in sales and EBIDTA is due to exit from bulk scotch business.

We will be reviewing our estimates for a downgrade to model: 1) one time refinancing costs of USL holdings loans 2) Increase in glass prices 3) lower profits in W&M and 4) benefits of lower ENA prices due to sourcing from newly acquired distillation units (2HFY12 onwards). The stock trades at 20.2x FY12 and 15.2x FY13 on current estimates. We have a Neutral rating on the stock.

Source : Equity Bulls

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