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Strong performance
United Breweries’ FY11 volumes growth was a strong 23% and the
management has guided for a 15% cagr for the next five years. UBBL has
exited FY11 with the highest ever market share of 56% (up from 51% for
FY10). The company’s proprietary bottles program and const control on
A&P expenditure will be the key margin drivers and we expect a strong
50% earnings cagr over the next two years. Long-term growth outlook
justifies the premium valuations.
4Q results as expected
United Breweries’ 4QFY11 net profit grew by 53% YoY to Rs401m. The YoY
numbers not comparable as it includes the merger impact of MAPL, ABDL and
Empee breweries. The adjusted 4Q profits at Rs336m is up 28% YoY. Full year
FY11 earnings grew by 73% YoY to Rs1.68bn driven by a 64% ebitda growth.
Strong trend in volume growth should sustain in the medium term
Adjusted (for the merger impact) revenue growth of 33% was for FY11 which
was driven by a strong 23% growth in volumes, which were in turn driven by
a 27% growth in strong beer. The company achieved an all-time high market
share of 54% (51% in FY10), with an exit market share of 56%.
Notwithstanding the tax hikes in Maharashtra and a consequent 20% price
hike, the management continues to guide for a 15% volume cagr over the
next five years. With the state elections now behind, we would likely see price
hikes in the important states of Tamilnadu, West Bengal and Kerala.
Continued focus on margin improvement
During FY11, the companies margins expanded by 180bps with the reduction
in A&P, sales & distribution cost being the key driver. The company plans
strictly monitor these costs going forward as well and we build in 50bps
annual cost reduction going forward. Additionally, the company’s proprietary
bottles program has been rolled out in half the markets and the balance will
be completed in FY12 which should be another margin driver.
Net debt / ebitda ratio down to 2x
Tight control on working capital and improved profitability has driven the net
debt / ebitda ratio down from 2.7x at Mar’10 to 2.1x for Mar’11 for the
standalone entity. The impending merger of Chennai breweries and UB Nizam
/ Ajanta would be PBT neutral but would drive up debt by Rs3bn to nearly
Rs11bn. While the company plans a capex of Rs3bn in FY12, the refund of
Rs2.2bn from Balaji distilleries will partially address the cashflow issue
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Strong performance
United Breweries’ FY11 volumes growth was a strong 23% and the
management has guided for a 15% cagr for the next five years. UBBL has
exited FY11 with the highest ever market share of 56% (up from 51% for
FY10). The company’s proprietary bottles program and const control on
A&P expenditure will be the key margin drivers and we expect a strong
50% earnings cagr over the next two years. Long-term growth outlook
justifies the premium valuations.
4Q results as expected
United Breweries’ 4QFY11 net profit grew by 53% YoY to Rs401m. The YoY
numbers not comparable as it includes the merger impact of MAPL, ABDL and
Empee breweries. The adjusted 4Q profits at Rs336m is up 28% YoY. Full year
FY11 earnings grew by 73% YoY to Rs1.68bn driven by a 64% ebitda growth.
Strong trend in volume growth should sustain in the medium term
Adjusted (for the merger impact) revenue growth of 33% was for FY11 which
was driven by a strong 23% growth in volumes, which were in turn driven by
a 27% growth in strong beer. The company achieved an all-time high market
share of 54% (51% in FY10), with an exit market share of 56%.
Notwithstanding the tax hikes in Maharashtra and a consequent 20% price
hike, the management continues to guide for a 15% volume cagr over the
next five years. With the state elections now behind, we would likely see price
hikes in the important states of Tamilnadu, West Bengal and Kerala.
Continued focus on margin improvement
During FY11, the companies margins expanded by 180bps with the reduction
in A&P, sales & distribution cost being the key driver. The company plans
strictly monitor these costs going forward as well and we build in 50bps
annual cost reduction going forward. Additionally, the company’s proprietary
bottles program has been rolled out in half the markets and the balance will
be completed in FY12 which should be another margin driver.
Net debt / ebitda ratio down to 2x
Tight control on working capital and improved profitability has driven the net
debt / ebitda ratio down from 2.7x at Mar’10 to 2.1x for Mar’11 for the
standalone entity. The impending merger of Chennai breweries and UB Nizam
/ Ajanta would be PBT neutral but would drive up debt by Rs3bn to nearly
Rs11bn. While the company plans a capex of Rs3bn in FY12, the refund of
Rs2.2bn from Balaji distilleries will partially address the cashflow issue
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