United Spirits Q3 Results Review - Better-Than-Expected Performance; Valuation Rich: Nirmal Bang

Nirmal Bang Report

United Spirits Ltd.'s volume and gross profit in Q3 FY24 were in line with our expectations, but lower-than-expected staff costs and other expenses and higher-than expected other income led to a significant beat on Ebitda and profit after tax.

The management has stated that Ebitda margin for FY24 will be better than the earlier guidance of ~15% despite continued inflation in extra neutral alcohol, its key raw material, and likely higher-than-usual ad spends in Q4 FY24.

While we expect robust ~28% earning per share compound annual growth rate over FY23-FY25E on the back of a meagre 6% EPS CAGR in the preceding four years, valuation is rich at ~59 times FY25E EPS, especially considering lower return on capital employed compared to consumer peers.

We maintain 'Accumulate' with a target price of Rs 1,130 (Rs 1,040 earlier), valuing the stock at 50 times December 2025E EPS (50 times September 2025E earlier).

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