Since August 10, 2018, post September (Q2FY19) quarter results, UBL has outperformed the market by surging 22 per cent after it reported a 12 per cent volume growth compared with industry average growth of 9 per cent during the quarter. In comparison, the S&P BSE Sensex was down 3 per cent during the period.
EBITDA (earnings before interest, tax, depreciation and amortization) margin expanded 249 basis points (bps) year-on-year (YoY) to 21.5 per cent in Q2FY19. Cash flow from operations was strong and combined with better working capital management, resulted in UBL’s net debt levels decreasing significantly, to about Rs 930 million, driving interest costs down by 35 per cent, UBL said in a press release.
UBL is market leader in the beer segment (53 per cent share) with volume that is nearly twice that of its closest competitor. It has a very wide portfolio of brands straddling various consumer needs and price points. Kingfisher Strong, Kingfisher Premium, Kingfisher Ultra and Heineken are some of the leading and fast-growing brands in its portfolio.
“We model 17 per cent revenue growth aided by volume growth of 13 per cent and 4 per cent increase in net realisation. We model strong 130 bps expansion in EBITDA margins aided by increase in gross margins, continued cost saving initiatives and operating leverage benefits,” Kotak Securities said in Q3FY19 results preview.
Motilal Oswal Securities expects UBL’s revenue to grow by 18 per cent YoY in Q3FY19.
“We build EBITDA margin expansion of 230bps YoY to 15 per cent with EBITDA growth of 38.8 per cent YoY. We estimate 91 per cent adjusted profit after tax growth in Q3FY19”, the brokerage firm said in December quarter results preview.
The theme around favourable demographics, rising disposable income and low per capita beer consumption continues to attract global beer companies in India. From a regulatory perspective, the worst appears to be over with fading of highway ban and stable state excise policies, which would create a favourable consumer pricing scenario and assist overall volume growth, analysts at ICICI Securities said in result update.
Nirmal Bang Equities has initiated coverage on UBL with a ‘BUY’ rating and a target price of Rs 1,525 based on a P/E multiple of 50x.
“The strong brand portfolio of the company is well complemented by an excellent supply chain network of 21 own breweries and 10 contract breweries spread across 22 states in India. We find the company perfectly positioned to capture growth in the fast expanding beer market in India and other beverage occasions,” the brokerage firm said in a report dated December 13, 2018.
At 10:59 am, UBL was trading 3.5 per cent higher at Rs 1,462 on the BSE, as compared to 0.80 per cent rise in the S&P BSE Sensex. A combined 801,221 equity shares changed hands on the counter on the BSE and NSE so far.