United Spirits Q4 Results Review - Plethora Of Triggers, Upbeat Outlook: Dolat Capital

Dolat Capital Report

United Spirits Ltd.’s Q4 FY24 result was moderately healthy, in-line with street and ahead of our estimates driven by better gross margin and lower opex. On L2L basis, Q4 FY24 revenue/gross profit/Ebitda/adjusted profit after tax was at +7/9/35/50% YoY and FY24 at a healthy 10.5/15.5/34.5/51.4% YoY, despite second consecutive year of raw material pressure.

United Spirits had a strong recovery plus comeback post FY23 and especially FY24. Management remains confident of low double-digit revenue growth coupled with both gross and Ebitda margin expansion. Execution and delivery have also been on track.

Further potential triggers such as-

1. peak raw material inflation behind,

2. supply-chain agility program benefits,

3. new product launches especially in white spirts (McDowell’s X series),

4. healthy balance sheet,

5. roll-forward to FY27,

6. likely India-UK FTA and

7. positive RTM changes in Andhar Pradesh/Bihar/Delhi (if any) in the medium term - shall keep the momentum buoyant.

We tweak our FY25-26E EPS estimates by -2.5/+1.3%. Reiterate ‘Accumulate’ rating with target price of Rs 1,240 viz. Rs 1,140 @ 50 times FY26E standalone EPS + Rs 100 for IPL and treasury shares (versus Rs 1,225 @ 50 times FY26E EPS). Roll-forward to FY27 would increase our target price to Rs 1,445. Slow-down in P&A growth is a key risk.

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