United Spirits Q2FY11 Net sales increased 25.4% Y-o-Y :: Edelweiss

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United Spirits (UNSP IN, INR 1,592, BUY)
· United Spirits Q2FY11 Net sales increased 25.4% Y-o-Y to INR 13.54 bn (vs. our
estimate of INR 13.50 bn).
· Reported PAT increased 7% Y-o-Y to INR 746 mn (vs. our estimate of INR 905 mn).
· Volume up by 16% YoY in Q2FY11 (In Q1FY11 volumes rose 6% Y-o-Y ).
· Q2FY11 is seasonally the weakest quarter and company sold 26.6 mn cases (In Q1FY11
volumes at 26.7 mn cases).
· Apart from 16% volume growth, ~10% of growt h came through a mix of price growth
and 20% growth in top end brands.
· USL incurred launch and promotional expenses of INR 250 mn in Q2FY11 for 3 new
launches of McDowell No.1 Platinum Whisky, Black Dog, McDowell VSOP Brandy,
· A&P increased 86.6% to INR 1.56 bn. If EBITDA were adjusted for this launch and
promotional expenses, USL has a 35% YoY growth in EBITDA with a margin of ~19%.
· Interest Cost too increased by INR 232 mn to INR 983 mn due to refinancing of
overseas loan taken for acquisition of W&M. However on a consolidated basis, interest
costs are down from INR 2800 mn to INR 2510 mn in H1FY11.
· W&M had an EBITDA of GBP 14.03 mn against GBP 12.07 mn in Q2FY10 rising 16%
YoY. PBT rose sharply to GBP 6.7 mn from GBP 1.3 mn.
· Raw material costs were marginally lower QoQ.