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United Spirits UNSP IN
BUY
RESULTS FIRST LOOK
United Spirits' Q4FY11 results were largely in line, with revenue growth marginally below but EBITDA and PAT marginally above our estimates. The company is guiding for raw material costs to trend down over the next couple of quarters, which will be a positive heading into FY12. While Q4 results were largely in line, we believe profitability will improve in FY12F and would look to buy at current levels. Maintain BUY.
Price target: 1800.0 INR
Q4FY11 results in line
•
Earnings vs. our Forecast:
IN LINE
Likely Impact:
•
Earnings Estimates:
DOWN
•
Dividend Estimates:
NO CHANGE
•
Price Target:
DOWN
•
Long-term View:
CONFIRMED
Key takeaways from the Q4FY11 results
•
Volume growth during the quarter was +12% y-y (adjusted for the Balaji distillery merger) in the domestic business to 28.8mn cases. For FY11, the company closed with volumes of 112.2mn cases for the domestic business.
•
Reported revenue growth during the quarter was 28%, however on a like-for-like basis, revenues grew by 19% for the quarter.
•
The company increased selling prices effective April 1, 2011 to cover for a rise in packaging costs.
•
PBITDA for the quarter was Rs2.35bn which translates to EBITDA per case of Rs82 for the quarter. This is a 5% increase vs the comparable quarter last year. EBITDA margins were 14.8% for the quarter vs. our expectations of 14%.
•
On input prices, the company saw a 1.5% decline in Q4FY11 on a y-y basis, but a 5% increase on a sequential basis. However, the company is guiding for input prices to trend down over the next couple of quarters, which we believe will translate to improved EBITDA per case performance in FY12F.
•
Interest costs were up a marginal 2% y-y to Rs1.04bn. On a consolidated basis, interest costs for FY11 were Rs5.05bn vs Rs6.06bn in FY10.
•
PAT at Rs774mn increased 36% y-y for Q4FY11.
While Q4FY11 results were largely in line, we believe with input costs trending down into FY12 and benefits from recent acquisitions of distilleries to flow through to the bottom line, current valuations provide a good entry point.
Valuation Methodology and Investment Risks: We value the domestic business at an EV/EBITDA multiple of 14x and Whyte & Mackey at an EV/EBITDA multiple of 7x on average FY12F and FY13F earnings. Risks: Worsening of profitability in the domestic business owing to higher raw material costs is a key downside risk to our BUY call.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
United Spirits UNSP IN
BUY
RESULTS FIRST LOOK
United Spirits' Q4FY11 results were largely in line, with revenue growth marginally below but EBITDA and PAT marginally above our estimates. The company is guiding for raw material costs to trend down over the next couple of quarters, which will be a positive heading into FY12. While Q4 results were largely in line, we believe profitability will improve in FY12F and would look to buy at current levels. Maintain BUY.
Price target: 1800.0 INR
Q4FY11 results in line
•
Earnings vs. our Forecast:
IN LINE
Likely Impact:
•
Earnings Estimates:
DOWN
•
Dividend Estimates:
NO CHANGE
•
Price Target:
DOWN
•
Long-term View:
CONFIRMED
Key takeaways from the Q4FY11 results
•
Volume growth during the quarter was +12% y-y (adjusted for the Balaji distillery merger) in the domestic business to 28.8mn cases. For FY11, the company closed with volumes of 112.2mn cases for the domestic business.
•
Reported revenue growth during the quarter was 28%, however on a like-for-like basis, revenues grew by 19% for the quarter.
•
The company increased selling prices effective April 1, 2011 to cover for a rise in packaging costs.
•
PBITDA for the quarter was Rs2.35bn which translates to EBITDA per case of Rs82 for the quarter. This is a 5% increase vs the comparable quarter last year. EBITDA margins were 14.8% for the quarter vs. our expectations of 14%.
•
On input prices, the company saw a 1.5% decline in Q4FY11 on a y-y basis, but a 5% increase on a sequential basis. However, the company is guiding for input prices to trend down over the next couple of quarters, which we believe will translate to improved EBITDA per case performance in FY12F.
•
Interest costs were up a marginal 2% y-y to Rs1.04bn. On a consolidated basis, interest costs for FY11 were Rs5.05bn vs Rs6.06bn in FY10.
•
PAT at Rs774mn increased 36% y-y for Q4FY11.
While Q4FY11 results were largely in line, we believe with input costs trending down into FY12 and benefits from recent acquisitions of distilleries to flow through to the bottom line, current valuations provide a good entry point.
Valuation Methodology and Investment Risks: We value the domestic business at an EV/EBITDA multiple of 14x and Whyte & Mackey at an EV/EBITDA multiple of 7x on average FY12F and FY13F earnings. Risks: Worsening of profitability in the domestic business owing to higher raw material costs is a key downside risk to our BUY call.
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