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United Spirits Limited
Overweight
UNSP.BO, UNSP IN
Q4FY11 - Marginally below estimates on higher input
cost push
• Earnings marginally below expectations. United Spirits reported Sales,
EBITDA and PAT growth of 28%, 17% and 36% y/y respectively during
Q4FY11. Higher than expected input costs (GM declined 170bp y/y) led to
3% earnings miss.
• Consolidated PAT for FY11 came in 6% below estimates driven by
lower than expected gross margins, higher ad spends and negative
contribution from other subsidiaries/inter-company eliminations.
Consolidated EBITDA was flat y/y largely due to lower profits of Whyte &
Mackay. Interest costs declined 17% y/y during FY11.
• Margin gains likely in FY12 as higher glass costs will be negated by price
hikes (company has already undertaken 2-2.5% net price increase
YTDFY12) and lower ENA cost/case with contribution from recently
acquired distilleries flowing through 2H. Further management expects some
moderation in A&P spends/sales in FY12 which rose sharply by 80bps y/y
in FY11. We estimate 100bp y/y EBITDA margin expansion for domestic
operations in FY12.
• Volume growth trends remain fairly healthy, though there could be
volume disruption in Maharashtra state (9% of vol sales) on account of
recent steep price hike of 30-50% across brands to mitigate excise increase.
During Q4FY11 and FY11 domestic volume growth was robust at 12%. We
now estimate 10% volume growth in FY12 as we build in lower sales for
Maharashtra.
• Net Debt levels remain flat q/q at Rs57bn unlike previous three qtrs where
we saw sequential increase. Given high capex requirements (Rs11bn over
next 3 years), we don’t expect net debt levels to remain in decline in FY12.
• Earnings estimate and TP revisions. Our EPS estimates for FY12/13 are
lowered by 4-5% driven by lower margins. Our Mar'12 TP is revised to
Rs1208 as we cut EV/EBITDA multiple for domestic business to 13.5x,
maintaining 20% premium to global spirits companies. While the stock may
trade sideways near term in absence of any short term catalyst, we remain
positive on mid to long term business outlook.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
United Spirits Limited
Overweight
UNSP.BO, UNSP IN
Q4FY11 - Marginally below estimates on higher input
cost push
• Earnings marginally below expectations. United Spirits reported Sales,
EBITDA and PAT growth of 28%, 17% and 36% y/y respectively during
Q4FY11. Higher than expected input costs (GM declined 170bp y/y) led to
3% earnings miss.
• Consolidated PAT for FY11 came in 6% below estimates driven by
lower than expected gross margins, higher ad spends and negative
contribution from other subsidiaries/inter-company eliminations.
Consolidated EBITDA was flat y/y largely due to lower profits of Whyte &
Mackay. Interest costs declined 17% y/y during FY11.
• Margin gains likely in FY12 as higher glass costs will be negated by price
hikes (company has already undertaken 2-2.5% net price increase
YTDFY12) and lower ENA cost/case with contribution from recently
acquired distilleries flowing through 2H. Further management expects some
moderation in A&P spends/sales in FY12 which rose sharply by 80bps y/y
in FY11. We estimate 100bp y/y EBITDA margin expansion for domestic
operations in FY12.
• Volume growth trends remain fairly healthy, though there could be
volume disruption in Maharashtra state (9% of vol sales) on account of
recent steep price hike of 30-50% across brands to mitigate excise increase.
During Q4FY11 and FY11 domestic volume growth was robust at 12%. We
now estimate 10% volume growth in FY12 as we build in lower sales for
Maharashtra.
• Net Debt levels remain flat q/q at Rs57bn unlike previous three qtrs where
we saw sequential increase. Given high capex requirements (Rs11bn over
next 3 years), we don’t expect net debt levels to remain in decline in FY12.
• Earnings estimate and TP revisions. Our EPS estimates for FY12/13 are
lowered by 4-5% driven by lower margins. Our Mar'12 TP is revised to
Rs1208 as we cut EV/EBITDA multiple for domestic business to 13.5x,
maintaining 20% premium to global spirits companies. While the stock may
trade sideways near term in absence of any short term catalyst, we remain
positive on mid to long term business outlook.
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