Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
United Breweries – Not Rated
n Strong performance continues, sales surges 37.9% Y-o-Y
United Breweries Ltd (UBL) reported robust Q3FY11 result; revenue increased 37.9% Yo-
Y to ~INR 6.1 bn and PAT grew 40.3% Y-o-Y to INR 298 mn. EBITDA was up 43.1% Yo-
Y to INR 659mn.
n Volume growth continues; gains market share
UBL has seen very good volume growth in Q3FY11 in the key states of Karnataka (low
base last year), Andhra Pradesh (Change in Govt policies), Maharashtra (growing at 30%
and highly profitable), Orissa and UP (low base). The company’s market share (volume)
jumped to 59% in Dec 2010.
n Margins improve in spite of increasing COGS
The company managed to improve EBIDTA margins by 40bps Y-o-Y in spite of raw
material inflation (COGS surged by 194bps) indicating company’s ability to manage cost
and higher operating leverage. Higher COGS was offset by reduction in employee cost
(30bps), ad spends (65bps) and other expenditure (139bps).
n Outlook and valuations: Strong volume growth, margin expansion
We are bullish on UBL because of its strong brand (Kingfisher), unmatched focus on
premiumisation, better product quality, distribution, and dipping debt equity. The
company remains confident of a 15% CAGR in volumes for the next 5 years. New bottles
initiative by the company will drive cost saving over longer term and positively impact
margins. The alliance with Heineken offers best portfolio of national and international
brands in India provides an edge against its competitors. UBL is expanding Kingfisher
Ultra to smaller cities. Also trial runs of Heineken are taking place and the company will
start its manufacturing in FY12. With a relatively younger population and income levels
on the rise, India is seeing an increase in the popularity of beer. Product portfolio
spanning all price points, presence across price segments, highly recognized brands and
pan-Indian manufacturing facilities lend unmatched leadership to United Breweries and
high bargaining power with vendors, suppliers and distributors.
n UBL Q3FY11 Concall: Key Takeaways
· Good volume growth: UBL has seen very good volume growth in Q3FY11. Growth in
the key states has been quite good. Fast growing states are Karnataka (low base last
year), Andhra Pradesh (Change in Govt policies), Maharashtra (growing at 30% and
highly profitable), Orissa and UP (low base).
· Guidance of 15% CAGR in volumes for next 5 years: Company remains confident of
a 15% CAGR in volumes for the next 5 years. Govt policies on excise need to be seen.
· Market share at all time high: Market share for UBL is at all time high. Currently in
Dec, 2010 Market share is 59% and for 9MFY11 it is 53%. Market share for UBL shoots
up in the weak quarters of Q2 and Q3. However market share come down in Q1 and Q4
as players at lower margins become more active as demand shoots up.
· Q1 and Q4 are the best quarters in a year: Q1 and Q4 account for 31% and 29%
respectively of full year sales while Q2 and Q3 account for 19% and 20%.
· Price increase: Company in the past 5 years has seen a CAGR of 5-7% and is confident
of a similar trend going forward.
· Focus on premium end: UBL is expanding Kingfisher Ultra to smaller cities. Also trial
runs of Heineken are taking place and will be manufactured in FY12. Currently it is
imported and is quite expensive due to taxes which will come down once it is locally
manufactured.
· Raw material inflation: Cost of raw material used in brewing (Barley) has been stable
YoY. Company buys most of its barley requirement in March/April, so more clarity on
FY12 trend in RM will be available in the next 2 months. The only component of raw
material which is seeing inflation is the power and fuel costs which are ~11% of UBL’s
raw material costs, so no big impact.
· New bottles initiative will drive cost saving over longer term: Company expects to
complete 50% of its new bottling initiative by FY11 end and balance in FY12. This will
lead to 2 advantages: (1) bargaining power of bottle trader will reduce as UBL will be the
sole buyer instead of current scenario wherein the smaller competitors buy UBL bottles
and use it. This will be because UBL is embossing the bottles. (2) Also smaller players
currently do not have produce their own bottles and will thus be at a disadvantage. In
the medium term, costs will be marginally up as higher injection of new bottles happens.
· Variation in staff cost: In Q2FY11, Company pays the bonus which has led to QoQ
decline in Q3FY11 by 16%.
· Focus on bigger breweries: Company will have a Capex of INR 2-2.5 bn every year
and this will largely go for building larger bre weries instead of the current status of small
breweries. This will improve margins due to economies of scale.
· A&P spends to moderate over longer term: Company will rationalize below the line
ad spends (BTL) as Kingfisher strong is now the Number one beer and accounts for
~75% of UBL’s business. Kingfisher is the least discounted brand and discounting will
reduce further.
· Tax rate: Company’s tax rate will reduce once merger of MBIL happens. UBL will get
benefit of high losses in MBIL. This will lead to lower tax outflow at 20% instead of
current 34%. However MBIL is currently in BIFR and merger is in process.
· Net debt: UBL has net debt of INR 5 bn.
· Cash flow in 9MFY11: Company had an operating profit of INR 3050 mn. In terms of
usage of cash, debt repayment was INR 600 mn, working capital INR 500 mn, and Capex
of INR 900 mn.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
United Breweries – Not Rated
n Strong performance continues, sales surges 37.9% Y-o-Y
United Breweries Ltd (UBL) reported robust Q3FY11 result; revenue increased 37.9% Yo-
Y to ~INR 6.1 bn and PAT grew 40.3% Y-o-Y to INR 298 mn. EBITDA was up 43.1% Yo-
Y to INR 659mn.
n Volume growth continues; gains market share
UBL has seen very good volume growth in Q3FY11 in the key states of Karnataka (low
base last year), Andhra Pradesh (Change in Govt policies), Maharashtra (growing at 30%
and highly profitable), Orissa and UP (low base). The company’s market share (volume)
jumped to 59% in Dec 2010.
n Margins improve in spite of increasing COGS
The company managed to improve EBIDTA margins by 40bps Y-o-Y in spite of raw
material inflation (COGS surged by 194bps) indicating company’s ability to manage cost
and higher operating leverage. Higher COGS was offset by reduction in employee cost
(30bps), ad spends (65bps) and other expenditure (139bps).
n Outlook and valuations: Strong volume growth, margin expansion
We are bullish on UBL because of its strong brand (Kingfisher), unmatched focus on
premiumisation, better product quality, distribution, and dipping debt equity. The
company remains confident of a 15% CAGR in volumes for the next 5 years. New bottles
initiative by the company will drive cost saving over longer term and positively impact
margins. The alliance with Heineken offers best portfolio of national and international
brands in India provides an edge against its competitors. UBL is expanding Kingfisher
Ultra to smaller cities. Also trial runs of Heineken are taking place and the company will
start its manufacturing in FY12. With a relatively younger population and income levels
on the rise, India is seeing an increase in the popularity of beer. Product portfolio
spanning all price points, presence across price segments, highly recognized brands and
pan-Indian manufacturing facilities lend unmatched leadership to United Breweries and
high bargaining power with vendors, suppliers and distributors.
n UBL Q3FY11 Concall: Key Takeaways
· Good volume growth: UBL has seen very good volume growth in Q3FY11. Growth in
the key states has been quite good. Fast growing states are Karnataka (low base last
year), Andhra Pradesh (Change in Govt policies), Maharashtra (growing at 30% and
highly profitable), Orissa and UP (low base).
· Guidance of 15% CAGR in volumes for next 5 years: Company remains confident of
a 15% CAGR in volumes for the next 5 years. Govt policies on excise need to be seen.
· Market share at all time high: Market share for UBL is at all time high. Currently in
Dec, 2010 Market share is 59% and for 9MFY11 it is 53%. Market share for UBL shoots
up in the weak quarters of Q2 and Q3. However market share come down in Q1 and Q4
as players at lower margins become more active as demand shoots up.
· Q1 and Q4 are the best quarters in a year: Q1 and Q4 account for 31% and 29%
respectively of full year sales while Q2 and Q3 account for 19% and 20%.
· Price increase: Company in the past 5 years has seen a CAGR of 5-7% and is confident
of a similar trend going forward.
· Focus on premium end: UBL is expanding Kingfisher Ultra to smaller cities. Also trial
runs of Heineken are taking place and will be manufactured in FY12. Currently it is
imported and is quite expensive due to taxes which will come down once it is locally
manufactured.
· Raw material inflation: Cost of raw material used in brewing (Barley) has been stable
YoY. Company buys most of its barley requirement in March/April, so more clarity on
FY12 trend in RM will be available in the next 2 months. The only component of raw
material which is seeing inflation is the power and fuel costs which are ~11% of UBL’s
raw material costs, so no big impact.
· New bottles initiative will drive cost saving over longer term: Company expects to
complete 50% of its new bottling initiative by FY11 end and balance in FY12. This will
lead to 2 advantages: (1) bargaining power of bottle trader will reduce as UBL will be the
sole buyer instead of current scenario wherein the smaller competitors buy UBL bottles
and use it. This will be because UBL is embossing the bottles. (2) Also smaller players
currently do not have produce their own bottles and will thus be at a disadvantage. In
the medium term, costs will be marginally up as higher injection of new bottles happens.
· Variation in staff cost: In Q2FY11, Company pays the bonus which has led to QoQ
decline in Q3FY11 by 16%.
· Focus on bigger breweries: Company will have a Capex of INR 2-2.5 bn every year
and this will largely go for building larger bre weries instead of the current status of small
breweries. This will improve margins due to economies of scale.
· A&P spends to moderate over longer term: Company will rationalize below the line
ad spends (BTL) as Kingfisher strong is now the Number one beer and accounts for
~75% of UBL’s business. Kingfisher is the least discounted brand and discounting will
reduce further.
· Tax rate: Company’s tax rate will reduce once merger of MBIL happens. UBL will get
benefit of high losses in MBIL. This will lead to lower tax outflow at 20% instead of
current 34%. However MBIL is currently in BIFR and merger is in process.
· Net debt: UBL has net debt of INR 5 bn.
· Cash flow in 9MFY11: Company had an operating profit of INR 3050 mn. In terms of
usage of cash, debt repayment was INR 600 mn, working capital INR 500 mn, and Capex
of INR 900 mn.
No comments:
Post a Comment