United Breweries hits three-month low on volume growth concerns

The stock was down 2 per cent at Rs 1,293 on the BSE in the intra-day trade on Tuesday. It was trading at its lowest level since December 27, 2018.

Shares of United Breweries (UBL) hit a three-month low of Rs 1,293, down 2 per cent on the BSE in intra-day trade on Tuesday on concerns of lower volume growth during the general elections.

The stock of liquor firm was trading at its lowest level since December 27, 2018. In the past two months, it has underperformed the market by falling 9 per cent. The S&P BSE Sensex has risen 5 per cent during the period.

In the calendar year 2018, UBL had rallied 27 per cent on the back of strong earnings due to higher volume growth. In comparison, the benchmark index was up 6 per cent during the year. The stock hit an all-time high of Rs 1,494 on January 21, 2019, in the intra-day trade.

UBL mainly has eight products under the brand name “Kingfisher” catering to various price points and beverage preferences i.e. strong or mild besides strong brands such as Kalyani Black Label, Zingaro and London Pilsner. Further, with Heineken by its side, is present in the super premium category vis-à-vis strong international players like Corona, Stella Artois, etc, thereby covering the full spectrum of the product portfolio.

Long-term volume and earnings growth opportunity is immense for India’s largest beer player with strong barriers to entry in the form of distribution, brewery reach, scale and brands. Operating environment appears to be improving at a healthy pace, market share gains continue and profitability is increasing, indicating a healthy pace of earnings growth ahead, according to Motilal Oswal Securities.

Election-related disruptions in the summer of 2019 could be a near-term dampener. The antitrust issue remains an overhang, leading us to now value UBL in line with peer multiples, instead of 10 per cent premium earlier, the brokerage firm said in February 14, 2019 report.

Meanwhile, UBL on March 11, 2019, said the Debt Recovery Tribunal (DRT) in Bengaluru had transferred 2.80 per cent stake worth over Rs 1,025 crore held by Vijay Mallya-linked United Breweries (Holdings) in the company.

"The recovery officer-I, DRT-II, Bengaluru has transferred 74,04,932 equity shares comprising 2.80 per cent of the total issued and paid up equity share capital of the company in its name from the demat account of United Breweries (Holdings) which is under liquidation," UBL said in a regulatory filing.