'Hold' United Breweries Shares Maintains Nirmal Bang, Says Near-Term Multiples Leave Little Room For Upside

United Breweries Ltd. declared a largely in-line set of numbers in its Q1 FY26 results. Volume growth trend continues to be is healthy and market share gains continue, both at an overall basis, and in the premium segment.

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Nirmal Bang Report

While United Breweries Ltd.'s Q1 results were broadly in line, weak profitability in a crucial quarter will continue to drag full-year profitability in FY26. We have thus reduced our FY26 Ebitda forecasts even as we remain optimistic of healthy improvement in FY27 on a weak base of the preceding years.

As highlighted in our recent annual report note, we like the structural investment case for United Breweries not only for its immense opportunity for growth but also for the management’s investments in:

1. adding brewing capacity for the premium brands in key states,

2. adding significant capacities overall compared to the past,

3. investment in visi-coolers, and

4. spending more on marketing, all of which will benefit the company significantly in the longer term.

Better disclosures in the latest annual report on volumes and brand-wise premium volume growth are also heartening as are its investments in supply chain, digital transformation, and leadership development. The improvement in operating environment/reforms in several states like Rajasthan, Uttar Pradesh, Madhya Pradesh, Andhra Pradesh, Assam, Delhi, and Jharkhand that the company has called out are noteworthy from a structural perspective.

Volume growth and market share gains (both overall and especially in the premium segment) in the last eight quarters has been heartening. We believe that while the above investments that the company is making could impact near-term margins, the medium-to-longer term earnings growth outlook is extremely attractive.

Valuations on FY27 numbers are fair for now at ~39x FY27E EV/Ebitda, which does not leave significant room for upside. We, therefore, await a better entry point in this structurally attractive investment idea.

We maintain the target multiple at 40x on Jun-27E Ebitda with an unchanged target price of Rs2,195, thereby maintaining our Hold rating on the stock.

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