United Spirits: Q1FY19 PAT grows by 29.4% YoY

United Spirits Ltd Q1FY19 net sales grew 12.9% YoY to ₹2011.9 crores v/s Rs 1781.8 cr and EBITDA grew 22.2% YoY to ₹192.4 crores. EBIDTA margin expanded by ~70 bps YoY to 9.6%. PAT for the company grew by 29.4% YoY to Rs 81.4 crores. PAT margin expanded by ~50 bps YoY to 4.0%.

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What’s good about the company?

  • The company has >40% market share in spirits market in India.
  • During the quarter, underlying gross margin improved 266bps, driven mainly by savings from productivity programme and pricing which more than offset the inflation and the adverse impact of GST. Q1FY19 quarter significantly accelerated the investment behind brands with marketing spend up 30% compared to last year.

Challenges faced by the company

  • The company is facing intense competition from players like Pernod Ricard. Besides, regulatory challenges like ban of liquor in states like Gujarat, Bihar etc also affects the volumes of the company.

How does it fare against peers?

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United Spirits (CMP: Rs 573, M.cap: Rs 42083 cr) is trading at PEG ratio of 1.24 over the period FY18-20 and ROE of 28.2%.

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