Heineken brews heady growth!!! United Breweries ::ICICI Securities, link

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Heineken brews heady growth!!!
United Breweries (UBL), the market leader in the Indian beer market with
~51% market share, is well poised to benefit from the unprecedented
opportunity arising from the impending growth in per capita consumption
and an ever enlarging base of population in the legal drinking age. The
company is equipped with a strong portfolio of brands and the largest
distribution network in India, which is difficult to emulate for new global
brands entering the Indian market. Further, with a leaner organisation
structure and higher operational control in the hands of global major
Heineken, the financials are expected to see a gradual improvement. We
expect revenue and PAT to grow at a CAGR of 19.5% and 32.5%,
respectively, with RoE and RoCE improving from 13.2% and 14.3% to
19.3% and 21.6%, respectively, over FY14-17E.
Nascent market provides huge growth potential
The Indian beer market has grown at a CAGR of 8% over FY10-14. Per
capita consumption of beer in India remains low at 1.9 litre compared to
64.5 litre, 76.1 litre and 34.5 litre in Brazil, Russia and China, respectively.
Favourable demographics, greater social acceptance & higher disposable
income are expected to propel growth in per capita consumption of beer
from ~ 2 litres per annum to 5 litres over the next decade.
Pan-India presence, strong brand recall to sustain market leadership
UBL, with 18 owned and 10 contract manufacturing facilities, has a pan
India presence. Also, the company has a strong distribution network,
which enables it to capture the major market in India. UBL with its 14
major brands enjoys strong patronage and commands a market share in
excess of 50%. Though competition is rising from other global
companies, we believe UBL would be able to sustain its market leadership
as it would be difficult for competitors to emulate the reach of UBL due to
the complexity of the liquor business model in India.
Resilience to competition, nascent industry translate to premium valuations
UBL’s resilience to competition together with the tutelage of Heineken,
positions the company as the numero uno player in the industry. UBL’s
revenue, EBITDA and PAT are expected to grow at 19.5%, 21.7% and
32.5% CAGR, respectively, over FY14-17E due to nascent state of the
industry. Further, in more mature markets, global peers of UBL trade at
nearly 2.2x FY17E Mcap to sales. Subsequently, we assign a multiple of
2.1x FY17E to arrive at a target price of | 950 and recommend BUY.

LINK
http://content.icicidirect.com/mailimages/IDirect_UnitedBreweries_IC.pdf