Adjusted for one time excess bulk spirit sale worth ~Rs3bn, Q2 revenues rose 3% yoy although volumes fell 1% yoy to 28.4mn cases
Encouragingly, the key focus brand segment of prestige and above grew 14%/16% yoy to 7.4mn/15.3mn cases in Q2/H1
Main markets of TN & WB continue to dampen volume performance-TN saw USL output artificially restricted to 70% of its capacity while WB market is gradually coming to terms with sharp rise in duties at end of Q2 FY12 as volumes declined 3% for both USL and the industry
ENA cost rose ~Rs6/case to Rs159.3 which added Rs170mn to RM costs (+19% yoy) while adj RM costs were up ~54% yoy which led to 574bps yoy decline in EBIDTA margin though Q2 FY12 EBIDTA included Rs657mn in one time ENA levy write back
Interest costs jumped 18% yoy due to increased borrowings and higher interest rate which coupled with net nonrecurring loss of Rs340mn led to 73.5% decline in PAT.
Consolidated results: H1 revenues increased 20% yoy while PAT tripled yoy to ~Rs1.7bn, gross debt declined to ~Rs82bn vs ~Rs85bn in Q1 FY13. W&M H1 sales rose 33% yoy to GBP106mn, EBIDTA margin jumped 700bps to 20.4% and company posted PBT of GBP15mn vs pre tax loss of ~GBP1mn
Deal with Diageo (27.4% stake buy followed by open offer) would lead to ~Rs33bn cash inflow in to USL which is likely to be utilized for debt repayment; although the stock has ran up significantly in the past few weeks, given the improved outlook for margin and EPS upside from interest cost savings, we believe there is some steam left in the rally. Recommend BUY for 9-mth target of Rs1,815.
|(Rs m)||Q2 FY13||Q2 FY12||% yoy|
|Purchase of traded goods||(1,114)||(1,947)||(42.8)|
|OPM (%)||12.0||17.8||(574) bps|
|Effective tax rate (%)||34.0||33.0||96bps|
|Adj. PAT margin (%)||3.3||6.4||(313) bps|
|Y/e 31 March (Rs m)||FY11||FY12||FY13E||FY14E|
|yoy growth (%)||15.9||24.5||12.9||9.3|
|yoy growth (%)||-||(67.0)||95.8||31.8|
Note: numbers do not reflect impact of Diageo deal
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