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United Spirits
Performance Highlights
Quarterly Highlights (Standalone)
Y/E March (` cr) Revenue EBITDA OPM (%) Reported PAT 4QFY13 2,058 199 9.7 56 4QFY12 1,863 176 9.5 10 % yoy 10.5 13.2 24bp 444.3 3QFY13 2,174 246 11.3 81 % qoq (5.4) (18.9) (163)bp (30.5)
NEUTRAL
CMP Target Price
Investment Period
Stock Info Sector Market Cap (` cr) Net Debt Beta 52 Week High / Low Avg. Daily Volume Face Value (`) BSE Sensex Nifty Reuters Code Bloomberg Code FMCG 31,543 7,073 1.1 2586/547 339,128 10 19,674 5,967 UNSP.BO UNSP@IN
`2,412 -
For 4QFY2013, United Spirits (USL) standalone operating profit rose by 13.2% yoy to `199cr. However, net profit surged by 444% yoy (on a low base) to `56cr aided by higher other income of `75cr (vs. 15cr in 4QFY2012). Key highlights for the quarter: USL posted a 10.5% yoy growth in its standalone top-line to `2,058cr. Overall volumes for the quarter rose by 3.8% yoy (vs industry growth of 2%) and stood at 31.37 million cases. The volume growth in the prestige and above segments (constituting 23% of overall volume) stood at 31% yoy, indicating the companys focus towards the premium segment. Volumes in the regular segment (constituting 66% of overall volume), de-grew by 8% yoy (vs 5% industry de-growth in the segment). Despite the increase in ENA (key raw material) prices, the gross margin for the company stood higher by 57bp yoy due to premiumization and price hikes undertaken by it. Advertisement expenses (as a % of sales) too fell by 92bp yoy. However, increase in staff and other expenses as a % of sales resulted in only a marginal 24bp yoy improvement in OPM. Outlook and valuation: We expect USLs bottom-line to grow at a CAGR of 170% over FY2013-15 led by higher operating profits and lower interest costs due to reduction in debts post the UBH-Diageo deal. At the CMP, the stock is expensive, trading at 35.6x FY2015E EPS; we maintain a Neutral view on the stock. Key financials (Consolidated)
Y/E March (` cr) Net sales % chg Net profit % chg EBITDA margin (%) EPS (`) P/E (x) RoE (%) RoCE (%) P/BV(x) EV/Sales (x) EV/EBITDA (x)
Source: Company, Angel Research
Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 25.5 6.1 50.9 17.5
3m 0.2
1yr 22.8
3yr 19.6
FY2012 9,187 24.5 159 (63.1) 11.5 12.6 190.9 4.3 7.8 6.5 4.1 35.4
FY2013E 10,598 15.4 135 (14.9) 11.5 10.8 224.2 2.9 8.5 6.3 3.5 30.5
FY2014E 12,294 16.0 612 352.1 12.0 42.1 57.2 9.1 9.7 4.0 3.2 26.7
FY2015E 14,162 15.2 983 60.6 12.0 67.7 35.6 10.7 10.5 3.6 2.8 23.0
V Srinivasan
022-39357800 v.srinivasan@angelbroking.com
4QFY13 2,058 1,242 60.4 122 5.9 212 10.3 282 13.7 1,858 199 9.7 157 19 75 97 (13) 85 4.1 29 34.0 56 2.7 4.3
4QFY12 1,863 1,135 61.0 101 5.4 209 11.2 242 13.0 1,687 176 9.5 166 17 15 8 0 8 0.4 (2) (30.7) 10 0.6 0.8
% yoy 10.5 9.4 20.7 1.5 16.9 10.2 13.2 (5.6) 11.4 387.4 1,182.7 977.8 (1,290.5) 444.3 459.5
3QFY13 2,174 1,294 59.5 130 6.0 223 10.2 281 12.9 1,928 246 11.3 164 17 47 112 14 126 5.8 45 36.0 81 3.7 6.2
% qoq (5.4) (4.0) 1.4 (6.6) (1.3) (4.8) 0.6 0.5 6.2 (3.6) (18.9) (4.0) 12.5 58.0 (13.2) 0.0 (32.6) (28.8) (36.4) (5.6) (30.5) (26.5) (30.5)
FY2013 8,510 5,164 60.7 476 5.6 778 9.1 1,058 12.4 7,476 1,033 12.1 656 72 200 506 (22) 484 5.7 163 33.7 321 3.8 24.5
FY2012 7,543 4,524 60.0 421 5.6 745 9.9 904 12.0 6,593 949 12.6 594 61 221 515 (11) 504 6.7 161 32.0 343 4.5 26.2
% chg 12.8 14.1 13.2 4.5 17.1 13.4 8.9 10.4 18.0 (9.3) (1.8) (3.9) 1.3 (6.4) (6.4)
2,200
2,100 (` cr) 2,000 25
1,900
1,800 1,954 1,863 2,057 2,221 2,174 1,700 2,058 5
1,600
3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13 Topline Source: Company, Angel Research yoy growth (RHS)
(5)
(%)
15
400
30
(%) 25 20 15 10 5 0 3QFY12 4QFY12 1QFY13 OPM 10 10 16
11
11
2QFY13
Gross Margin
Investment Rationale
Dominant player with strong brands under its kitty: The Indian branded spirit industry sold nearly 290mn cases in FY2012 of which USL sold around 120mn cases, giving it a market share of around 41%, and making it one of the most dominant players in the industry. The company has a market share of around 59% for its first line brands in India. It is the largest spirit company in the world by volumes and has presence in scotch, whiskey, brandy, rum, vodka, gin and wine. It has strong brands under its kitty, such as McDowells, Bagpiper, Royal Challenge, Antiquity, Signature, Black Dog, White Mischief, Vladivar, Whyte & Mackay etc and all of these have a high recall. USL has four brands in the top 25 worldwide spirits brands. The McDowell No 1 family is the largest spirits brand in the world with sales of 44mn cases in FY2012. Diageo deal a game changer: The recently announced deal between UBH and Diageo is positive for USL as it brings multiple benefits to the company. On the financial front, Diageo would infuse funds of `3,300cr into USL for the subscription of preferential allotment and towards the purchase of treasury shares. USL would use these funds to repay its debts which stand at ~`8,000cr in its consolidated balance sheet. Lowering of debts would result in reducing the interest costs and thereby boost the companys earnings The deal would provide synergistic benefits as USL can leverage the potential of Diageos premium brands with its strong distribution strengths, which would result in expansion of overall business and also result in better operating margins. Post this deal, UBH will lose control over USLs board of directorship and Diageo will nominate majority of the directors. The new board is expected to be more focused in decision making considering that the UBH group is currently present in diverse businesses in India and its aviation arm Kingfisher is currently facing a huge financial crisis.
10x
25x
40x
CMP (`)
4,801 576 1,440 155 825 4,929 585 332 223 5,269 139 2,412
TP (`)
-
Upside (%)
-
CAGR # Sales
15.4 15.5 15.1 16.5 18.8 17.6 14.7 16.2 14.8 14.9 10.0 15.6
FY14E
3.6 1.0 5.3 3.7 3.7 5.2 4.2 7.2 2.7 5.3 1.0 3.2
FY15E
3.0 0.8 4.5 3.1 3.2 4.4 3.6 6.1 2.3 4.5 0.9 2.8
FY15E
32.2 37.3 88.0 40.1 24.2 33.7 87.0 34.9 21.0 50.7 9.8 10.7
EPS
18.4 22.0 17.4 19.5 18.9 19.6 11.7 19.2 24.0 16.2 13.0 169.5
Source: Company, Angel Research; Note: Denotes CAGR over FY2012-14E, *December Year Ending.
Company Background
USL is the leading alcoholic beverages producer and distributor in India with a volume market share of 41%. The company has strong brands under its kitty such as McDowells, Bagpiper, Royal Challenge, Antiquity, Signature, Black Dog, White Mischief, Vladivar, Whyte & Mackay etc. It has the largest manufacturing presence in the country with 40 owned plants and 42 contract plants and has a capacity to service 64,000 outlets.
6,362 16.4 5,331 3,178 2,153 1,032 33.9 16.2 95 937 38.2 14.7 607 85 20.5 414 547.2 (245) 170 193 113.6 (23) (0) (1) 94.3 (23) (245) 222 907.2 3.5 (1.9) 18.4 770.0
7,376 9,187 15.9 6,224 3,853 2,371 11.7 15.6 102 1,050 12.1 14.2 498 144 20.7 695 67.7 138 834 265 31.8 568 (1) (3) 2,550.4 570 138 431 94.4 5.8 45.2 34.3 86.4 24.5 8,126 5,132 2,995 (8.0) 11.5 147 913 (13.1) 9.9 876 269 87.9 306 (55.9) 29 335 148 44.2 187 (1) (1) (67.1) 188 29 159 (63.1) 1.7 14.9 12.6 (63.1)
10,598 15.4 9,378 5,952 3,426 1,220 15.0 11.5 178 1,041 14.1 9.8 985 253 81.8 310 1.1 (237) 73 178 244.6 (105) (4) (156.2) (101) (237) 135 (14.9) 1.3 (8.1) 10.8 (14.9)
12,294 16.0 10,818 6,823 3,995 1,475 21.0 12.0 213 1,262 21.2 10.3 754 420 45.3 927 199.5 927 315 34.0 612 (681.6) 612 612 352.1 5.0 42.1 42.1 291.6
14,162 15.2 12,463 7,860 4,603 1,699 15.2 12.0 235 1,465 16.1 10.3 570 595 39.9 1,490 60.6 1,490 507 34.0 983 60.6 983 983 60.6 6.9 67.7 67.7 60.6
1,152 1,060
Key Ratios
Y/E March Valuation Ratio (x) P/E (on FDEPS) P/E (on basic, reported EPS) P/CEPS P/BV Dividend yield (%) Market cap. / Sales EV/Sales EV/EBITDA EV / Total Assets Per Share Data (`) EPS (Basic) EPS (fully diluted) Cash EPS DPS Book Value Dupont Analysis (%) EBIT margin Tax retention ratio Asset turnover (x) ROIC (Post-tax) Cost of Debt (Post Tax) Leverage (x) Operating ROE Returns (%) ROCE (Pre-tax) Angel ROIC (Pre-tax) ROE Turnover ratios (x) Asset Turnover (Gross Block) Asset Turnover (Net Block) Asset Turnover (Total Assets) Operating Inc. / Inv. Cap. Inventory / Sales (days) Receivables (days) Payables (days) WC cycle (ex-cash) (days) Solvency ratios (x) Gross debt to equity Net debt to equity Net debt to EBITDA Int. Coverage (EBIT / Int.) FY10 FY11 FY12 FY13 FY14E FY15E
131.2 131.2 91.8 7.7 0.1 4.6 5.3 32.8 3.5 18.4 18.4 26.3 2.6 313 14.7 (13.6) 0.7 (1.5) (1.3) 1.4 (1.7) 9.4 21.5 7.2 2.7 3.8 0.6 0.7 100 64 98 125 1.5 1.2 4.5 1.5
70.4 190.9 70.4 190.9 56.9 7.3 0.1 4.1 4.9 31.3 3.3 34.3 34.3 42.4 2.6 332 14.2 68.2 0.8 7.6 5.7 1.2 9.9 10.2 21.1 10.8 2.9 4.0 0.7 0.8 96 70 93 147 1.5 1.3 4.9 2.1 99.1 6.5 0.1 3.3 4.1 35.4 3.0 12.6 12.6 24.3 2.6 370 9.9 0.8 4.6 7.0 1.3 1.4 7.8 14.9 4.3 2.9 3.9 0.8 0.8 97 69 108 145 1.6 1.5 6.5 1.0
224.2 224.2 96.7 6.3 0.1 2.9 3.5 30.5 3.1 10.8 10.8 24.9 2.6 380 9.8 0.9 (12.8) (19.4) 1.4 (3.4) 8.5 15.9 2.9 2.8 3.8 0.9 0.9 91 62 119 127 1.5 1.4 5.5 1.1
57.2 57.2 42.4 4.0 0.1 2.9 3.2 26.7 2.8 42.1 42.1 56.8 2.2 597 10.3 66.0 1.0 6.8 8.1 0.6 5.9 9.7 17.7 9.1 3.0 4.3 0.9 1.0 92 64 119 124 0.6 0.5 2.8 1.7
35.6 35.6 28.8 3.6 0.1 2.5 2.8 23.0 2.8 67.7 67.7 83.8 2.2 663 10.3 66.0 1.1 7.3 8.1 0.4 7.0 10.5 18.3 10.7 3.2 4.6 1.0 1.1 102 73 125 126 0.4 0.4 2.2 2.6
55.8 (144.6)
E-mail: research@angelbroking.com
Website: www.angelbroking.com
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Disclosure of Interest Statement 1. Analyst ownership of the stock 2. Angel and its Group companies ownership of the stock 3. Angel and its Group companies' Directors ownership of the stock 4. Broking relationship with company covered
United Spirits No No No No
Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors
Ratings (Returns):
10