United Breweries rallies 6 per cent on heavy volumes, hits 52-week high

The company said although the trajectory of Covid is unknown, confidence is derived from the trends after the first Covid wave, whereby consumer behavior towards beer consumption remained intact

Shares of United Breweries rose 6 per cent and hit a 52-week high of Rs 1,455 on the BSE in intra-day trade on Monday on the back of heavy volumes. The stock of the breweries & distilleries company surpassed its previous high of Rs 1,432.85, touched on June 8, 2021.

The trading volumes on the counter doubled with a combined 2.6 million shares changing hands on the NSE and BSE. In comparison, the S&P BSE Sensex was down 0.40 per cent at 52,136 points at 12:06 pm. In the past one month, the stock has rallied 14 per cent, as compared to 3 per cent rise in the benchmark index.

On June 7, 2021, United Breweries informed the stock exchanges that the Deputy Director, Directorate of Enforcement (ED), Mumbai has transferred 41.31 million equity shares constituting 15.63 per cent of the equity share capital of the company (out of 42.70 million equity shares constituting 16.15 per cent) to the Demat account of Recovery Officer I DRT-II. Earlier these equity shares were held by certain of our Promoter group Companies, the company said.

Meanwhile, in the January-March quarter (Q4FY21), United Breweries volumes grew across markets, excluding Telangana, Odisha and Delhi. North/West/East grew in double-digits, whereas growth in South was largely impacted by the steep decline in Telangana on higher Covid taxes.

“Category recovery has been encouraging in H2 and improves visibility of volumes recovering strongly on full unlocking. While Q1 remains uncertain due to lockdowns and will impact FY22 growth, volume outlook for FY23 based on full unlocking remains intact which can see upside risk from recent price reductions in Rajasthan and Uttar Pradesh and benign taxation across most markets,” analysts at Emkay Global Financial Services said in Q4FY21 result update.

United Breweries has displayed solid cost savings in previous quarters but the sharp reduction in overhead costs may also be partly due to the temporary cut in ad spends as well as one-off savings. Despite a difficult year, the company has generated higher cash flows, driven by working capital reduction, and has turned net cash positive, the brokerage firm said.

During the financial year 2020-21 (FY21), the United Breweries said it witnessed strong progressive demand recovery quarter by quarter. The various measures taken by management resulted in recovery of market shares in the second half of the year, improved underlying profitability and strong free operating cash flow results. With the onset of a second Covid wave at the start of FY21-22, the beer industry is again negatively impacted, and the outlook is volatile.

Although the trajectory of Covid is unknown, confidence is derived from the trends after the first Covid wave, whereby consumer behavior towards beer consumption remained intact, the company said in FY21 annual report.