United Spirits Q3 Results Review - Prestige And Above Outperformance Sustains: Motilal Oswal

Motilal Oswal Report

United Spirits Ltd.'s registered a 7.5% YoY revenue growth (estiamte: 5.5%), with the Prestige and Above segment recording a 10% growth. While overall volume contracted 2% YoY, P&A volumes registered an increase of 5% YoY (4% four-year compound annual growth rate). The popular segment, both in terms of value/volume witnessed a decline of 12%/23% YoY, respectively.

The premiumisation trends in the liquor category (post Covid) continued to drive the P&A portfolio. Scotch continued to outpace within the P&A portfolio. Pricing strategies have also played a significant role in achieving better value growth.

The gross margin continued to see gradual recovery, up 300 basis points YoY, and flat QoQ at 43.4%.

However, it is still distant from the 48-49% levels achieved in FY18-FY19. After seeing high raw material inflation in the last three to four years, prices are expected to stabilise (steady glass prices, etc.).

In our projections, we model a gross margin of 44% in FY25/FY26.

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