This Alcohol Maker Has Analysts Doubting Their Skills

Alcohol maker United Spirits Ltd. has left analysts doubting their ability to make forecasts for such a volatile business.

The stock fell as much as 6.6 percent today, the most since July, after the maker of Kingfisher beer reported a 9 percent decline in profit and a marginal increase in revenue for the December quarter on lower volumes. Diageo Plc-promoted company's net profit of Rs 135 crore was much lower than the Rs 210 crore consensus estimate of analysts tracked by Bloomberg.

That's a stark contrast to its previous quarter performance when its profit jumped 86 percent—again much higher than analyst expectations— on lower input costs and a volume recovery.

The wide gap in estimates and actual numbers has left brokerage Kotak Securities doubting analysts' ability to forecast quarterly numbers for the business as volatile and with as many regulatory linkages.

“We take this opportunity to once again highlight the biggest challenge in forecasting time periods as short as a quarter. State mix is perhaps the most important variable at play for companies in this industry,” Kotak said in a note. “This mix tends to be fairly volatile and there is absolutely no available public information that can help one assess the quarterly swings in state mix.”