United Spirits Stock Falls Most In Eight Months After Q3 Results

Shares of United Spirits Ltd. fell the most since May last year on account of a fall in sales in the third quarter and lack of growth guidance.

“Despite a quicker rebound than originally expected, in the near-term, there are still reasons to remain cautious and consequently, the company is not providing quantitative guidance for fiscal 2021,” the alcoholic beverage maker said in an exchange filing.

USL’s revenue declined 4% over the year-earlier to Rs 2,488.7 crore in the three months ended December. Its net profit fell 11% to Rs 229.9 crore. Both the top and bottom line, however, met the Bloomberg consensus estimate of Rs 2,584.8 crore and Rs 221.6 crore, respectively.

The company’s operating income fell 9% to Rs 282.8 crore, while Ebitda margin contracted to 15.4% from 16.4%.

Operational highlights (year-on-year)

• Prestige and Above segment sales fell 0.8%.
• Net sales from the popular segment fell 6.7%, led by a decline in priority states. Increased consumer prices impacted demand in the price-conscious segment.
• Gross margin rose 24 basis points to 44.6%, driven by benign commodity prices and continued focus on productivity.
• Interest costs fell 17%, driven by reduced debt and lower interest rates.

“United Spirits is currently trading at 50x/40x FY22/23E EPS. Pick-up in on-trade consumption and price increase in Karnataka are potential triggers,” Dolat Capital said in a post-earnings note.

UBS had upgraded the stock to ‘buy’ from ‘sell’ ahead of its earnings, anticipating volume growth to remain positive in 2021.

Shares of United Spirits fell as much as 7.6% to Rs 596.1, snapping a two-session gaining streak. Of the 22 analysts tracking the company, 14 have a ‘buy’ rating, five suggest a ‘hold’ and three recommend a ‘sell’. The average of Bloomberg consensus 12-month price targets implies an upside of 5.2%.