United Spirits Q2 Results Review

United Spirits Ltd.’s Q2 FY24 was marginally ahead. Performance was healthy. Revenue/ gross profit/Ebitda/adjusted profit after tax were + 12.2/19.8/20.8/32.4% YoY on like-to-like basis.

United Spirits has multiple tailwinds in the medium-term viz. premiumisation, benefits from India-UK free trade agreement, supply chain agility program and likely softening in raw material medium-term.

That said, near-term (H2) outlook remains tepid on account of weak-demand, raw material inflation and higher advertising and promotion spends.

These is likely to moderate growth and negative trigger for stock-price in short-term.

We reduce FY24/25E earnings per share by 3.5% each to factor weak Q3 FY24 outlook. Reiterate ‘Reduce’ with revised target price of Rs 1,200 viz. Rs 1,100 at 50 times FY26E standalone EPS + Rs 100 for IPL and treasury shares (earlier Rs 1,065 at 50 times FY25E EPS).

Increase in target price is on account of roll-forward. Buy on dips. Structural slow-down in Prestige & Above growth is key risk.

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