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Another earnings cut
We lower United spirits’ earnings estimates by 7% to reflect higher raw
material costs and interest costs. From hereon, we believe that the
likelihood of more earnings cut remains minimal as the benefit of the
backward integration begins to kick-in from 2HFY12. While continuous
increase in debt levels is a worry, volume growth remains robust 15%
YoY during 1QFY12, notwithstanding the excise duty hikes in
Maharashtra, which is encouraging. We lower our target price to
Rs1,050/share.
1QFY12 earnings below expectations
United Spirits 1QFY12 standalone earnings were up 14% YoY to Rs1.38bn –
lower than our expectations due to higher raw material costs and higher
interest costs. To factor in the same, we cut United Spirits’ earnings estimates
by 7%. Volume growth was 15% despite the Maharashtra shock.
Raw material costs move up but 2H would be better
ENA prices eased 2.5% QoQ to Rs147/case during 1Q which is still up 3%
YoY. We now assume that ENA prices will be up 1% YoY during FY12 to
145/case. Glass prices are also up 18% YoY which makes the weighted RM
costs inflation at 7 ppts YoY. The like to like impact on Ebitda margins is only
1 ppts thanks to lower A&P and mix improvement. Margin performance will
improve in 2HFY12 as the impact of backward integration begins to be visible.
Net debt continues to move up
The company’s consolidated net debt increased by Rs7.5bn QoQ and now
stands at Rs65bn. The debt increase was largely driven by increased working
capital requirements.
Consolidated earnings up 6% YoY
Whyte & Mackay’s net profit reduced by GBp2.4m (Rs170m) YoY during the
quarter as the Ebitda margins halved to 10%. This, along with some pension
costs / lease provisioning resulted in the consolidated profit growth dropping
to 6% YoY to Rs1.13bn. The management however maintains its full year
Ebitda guidance of GBp33m.
Lowering target price to Rs1,050/share
To arrive at our 12-m target price, we apply a 20x multiple United Spirits’
Mar-13 domestic business of Rs50/share and add Rs50/share as the equity
value of Whyte & Mackay.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Another earnings cut
We lower United spirits’ earnings estimates by 7% to reflect higher raw
material costs and interest costs. From hereon, we believe that the
likelihood of more earnings cut remains minimal as the benefit of the
backward integration begins to kick-in from 2HFY12. While continuous
increase in debt levels is a worry, volume growth remains robust 15%
YoY during 1QFY12, notwithstanding the excise duty hikes in
Maharashtra, which is encouraging. We lower our target price to
Rs1,050/share.
1QFY12 earnings below expectations
United Spirits 1QFY12 standalone earnings were up 14% YoY to Rs1.38bn –
lower than our expectations due to higher raw material costs and higher
interest costs. To factor in the same, we cut United Spirits’ earnings estimates
by 7%. Volume growth was 15% despite the Maharashtra shock.
Raw material costs move up but 2H would be better
ENA prices eased 2.5% QoQ to Rs147/case during 1Q which is still up 3%
YoY. We now assume that ENA prices will be up 1% YoY during FY12 to
145/case. Glass prices are also up 18% YoY which makes the weighted RM
costs inflation at 7 ppts YoY. The like to like impact on Ebitda margins is only
1 ppts thanks to lower A&P and mix improvement. Margin performance will
improve in 2HFY12 as the impact of backward integration begins to be visible.
Net debt continues to move up
The company’s consolidated net debt increased by Rs7.5bn QoQ and now
stands at Rs65bn. The debt increase was largely driven by increased working
capital requirements.
Consolidated earnings up 6% YoY
Whyte & Mackay’s net profit reduced by GBp2.4m (Rs170m) YoY during the
quarter as the Ebitda margins halved to 10%. This, along with some pension
costs / lease provisioning resulted in the consolidated profit growth dropping
to 6% YoY to Rs1.13bn. The management however maintains its full year
Ebitda guidance of GBp33m.
Lowering target price to Rs1,050/share
To arrive at our 12-m target price, we apply a 20x multiple United Spirits’
Mar-13 domestic business of Rs50/share and add Rs50/share as the equity
value of Whyte & Mackay.
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