Hold United Breweries; target of Rs 1500: ICICI Direct
ICICI Direct’s research report on United Breweries
United Breweries (UBL) grew 10% YoY in Q1FY20 with volume growth of 5%. Although the volume growth comes on a high base of 12% volume growth in Q1FY19, the current volume growth was impacted by general election related restrictions in supplies, production and dispatch of beer during May and April of Q1FY20. However, growth was largely secular across the key geographies. EBITDA margins were negated by 540 bps to 16.1% mainly due to lower gross margins (higher ENA and barley prices). Subsequently, EBITDA and PAT de-grew 18% and 26%, respectively. On the CCI probe, the company has disclosed that it has not received any demand order and has not provided any estimated financial impact of the probe.
However, we maintain our HOLD recommendation as the price captures the medium and long term positivity in the sector (~46x P/E multiple).
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