United Spirits (Q3 FY14)

United Spirits reported muted set of results with net revenue growth of 4.8% yoy, 185bps yoy contraction in gross margin and PAT decline of 19.4% yoy

Feb 15, 2014 06:02 IST India Infoline News Service

CMP Rs2,364, Target Rs2,350, Downside 0.6%

  • United Spirits reported muted set of results with net revenue growth of 4.8% yoy, 185bps yoy contraction in gross margin and PAT decline of 19.4% yoy

  • Prestige and above segment grew at 12% (imputed net sales +15% yoy) accounting for ~28% of overall volumes which declined 3.7% yoy

  • ENA prices rose Rs16/case yoy (+Rs9/case qoq) leading to adverse impact of Rs500mn in Q3-consequently gross margin declined 185bps yoy which in turn led to ~19% yoy drop in EBIDTA

  • Premiumization trends notwithstanding, input cost pressures are unlikely to correct significantly in the near term which would continue to remain an overhang on margins; revise  our FY14/15 estimates and retain Market Performer with 9-12 mth target of Rs2,350

Results table (standalone)
(Rs m) Q3 FY14 Q3 FY13 % yoy 9m FY14 9m FY13 % yoy
Gross sales 55,028 50,502 9.0 155,437 142,314 9.2
Excise duty (32,244) (28,762) 12.1 (90,343) (77,795) 16.1
Excise rate (%) 58.6 57.0 164 bps 58.1 54.7 346 bps
Net sales 22,784 21,740 4.8 65,094 64,520 0.9
Other op income 302 287 5.3 639 603 5.9
Net sales 23,086 22,027 4.8 65,733 65,123 0.9
Material costs (11,871) (10,503) 13.0 (33,238) (33,874) (1.9)
Purchase of stock in trade (2,125) (2,442) (13.0) (5,958) (5,338) 11.6
Personnel costs (1,555) (1,301) 19.6 (4,184) (3,549) 17.9
Other expenditure of which (5,315) (5,035) 5.6 (14,961) (13,419) 11.5
  - Advt & sales (2,338) (2,225) 5.1 (6,563) (5,660) 16.0
  -Others (2,977) (2,810) 6.0 (8,398) (7,759) 8.2
Operating profit 2,221 2,746 (19.1) 7,392 8,944 (17.4)
OPM (%) 9.6 12.5 (285) bps 11.2 13.7 (411) bps
Depreciation (183) (173) 5.4 (545) (524) 4.2
Interest (1,505) (1,636) (8.0) (4,464) (4,992) (10.6)
Other income 619 185 235.2 1,514 422 259.1
PBT 1,153 1,122 2.7 3,897 3,851 1.2
Tax (313) (453) (30.9) (1,375) (1,344) 2.3
Effective tax rate (%) 32.5 36.0 (345) bps 33.1 33.7 (114) bps
Adjusted PAT 840 670 25.4 2,523 2,507 0.6
Adj. PAT margin (%) 3.6 3.0 60 bps 3.8 3.8 (21) bps
FX gain/(loss) (191) 136 - 250 141 77.1
Reported PAT 649 806 (19.4) 2,773 2,648 4.7
Source: Company, India Infoline Research

Financial summary
Y/e 31 March  (Rs m) FY13 FY14E FY15E FY16E
Revenues 106,950 109,410 118,162 131,219
yoy growth (%) 15.7 2.3 8.0 11.1
Operating profit 13,169 12,308 13,810 16,745
OPM (%) 12.3 11.2 11.7 12.8
Pre-exceptional PAT 1,210 3,193 4,581 6,638
Reported PAT (1,012) 8,100 4,581 6,638
yoy growth (%) - - (43.5) 44.9
EPS (Rs) (8.0) 55.7 31.5 45.7
P/E (x) - 42.4 75.0 51.8
P/BV (x) 6.2 3.9 3.7 3.5
EV/EBITDA (x) 28.7 31.3 28.0 22.9
Debt/Equity (x) 1.7 0.6 0.6 0.5
ROE (%) 2.6 4.7 5.0 6.9
ROCE (%) 9.7 8.5 9.0 10.9
Source: Company, India Infoline Research

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