United Breweries Q1 Results Review - Volatile FY24, Upbeat FY25: Dolat Capital

Dolat Capital Report

United Breweries Ltd.’s Q1 FY24 operating performance was significantly weak with volume de-growth of 12% YoY (4% excluding root-to-market changes market).

Revenue / gross profit / Ebitda/adjusted profit after tax were -6.7/-14.5/-15.9/-15.8% YoY. Lower opex led to beat on Ebitda.

United Breweries’ FY24 outlook is cloudy as it focusses on responsible and profitable growth in key states, premium brands and curtailing operations where it is not contribution-positive/legitimate.

This may led to volatile volumes and revenues in the short-term but likely to improvise margins. These coupled with favorable base, softening raw material, stabilisation of market share and announcement of Managing Director and Chief Executive Officer by September 2023 are near term triggers.

We estimate United Breweries to register a revenue compound annual growth rate of ~7% but healthy Ebitda/earnings CAGR of 42/55% over FY23-25E.

We increase our EPS for FY24/25 by 16/7% to factor lower opex of Q1 FY24. In backdrop of market getting re-rated, United Breweries’ underperformance and slew of triggers, we upgrade our multiple from 45 times to 50 times.

Upgrade to 'Reduce' from 'Sell' with target price of Rs 1,485 at 50 times FY25E EPS (versus Rs 1,250). Increase in competition is key risk.

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