Q1 Results: United Spirits Profit Misses Estimates Due To One-Off Hit

United Spirits Ltd.'s profit fell short of analysts' estimates for the April-June period due to a one-off impact on sales from a change in operating model.

The company's net profit rose 29 percent to Rs 81.3 crore, according to its stock exchange filing yesterday. The figure missed the Rs 133-crore consensus estimate of analysts tracked by Bloomberg.

The Diageo-owned firm's revenue improved by 12.9 percent over last year to Rs 2,012 crore. The increase in sales was due to a low-base effect from the corresponding quarter as the industry was reeling from a Supreme Court ban on the sale of liquor on Indian highways, Anand Kripalu, chief executive officer of United Spirits said.

Operating profit rose by 22 percent on a year-on-year basis to Rs 192 crore. Margin expanded 70 basis points to 9.5 percent.

India's largest spiritmaker has been focussing on premiumisation as it looks to improve margins. The ‘Prestige' and ‘Above' segments, both which are costlier, saw sales improve 19 percent. Its cheaper 'Popular' segment, however saw sales decline 3 percent “due to the on-off impact of operating model changes”, the press release said.

“Looking forward we will continue to focus on premiumisation, strengthening our brands and driving productivity while playing a leadership role in shaping the landscape of this industry,” the release said. “We reiterate our medium-term ambition to deliver double digit topline growth and improve margins to mid-high teens.”

The stock had closed 2.2 percent higher ahead of the results announcement.

Here's What Brokerages Had To Say

Emkay

• June quarter's results reported disappointing numbers.
• Overall volume grew by 1 percent compared to our expectations of above 14 percent.
• Gross margin improved by due to price hikes in key states and better product mix.
• Maintained ‘Reduce' with a price target of Rs 600.

Macquarie

• June quarter's adjusted net profit below estimates on account of higher Ad and other spends.
• Volume growth in-line with our estimates.
• Expect Ad spend to remain high on higher competitive intensity.
• Expect significant downgrades to consensus.
• Maintained ‘Underperform' with a price target of Rs 443.

Morgan Stanley

• Weak volume growth and sharp increase in costs affected June quarter's margins.
• See low visibility on earnings growth, especially after weak June quarter.
• Stock to trade lower on continuing overhang of GST uncertainty.
• Maintained ‘Equal-weight' with a price target of Rs 650.