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Nirmal Bang Report
While United Breweries Ltd.'s Q4 FY23 revenue came inline with our estimate, significantly higher-than-expected raw material inflation resulted in big disappointment in margins.
Beer volume grew by 3% YoY in Q4 FY23 (up 31% in FY23), lower than our estimate of 7% YoY volume growth. Premium volume grew by 18% YoY, ahead of the total portfolio, with strong performance by Heineken and Kingfisher Ultra and Max.
Ebitda margin stood at 3% (down ~1220 basis points YoY and ~200 bps QoQ), surprising us negatively. Gross margin contracted significantly by ~1010 bps YoY to 38.6% versus estimate of 43% (and surprisingly down ~320 bps QoQ over depleted Q3 FY23 levels) on account of inflationary pressures, especially in Barley and Glass.
Inflationary pressures are expected to continue in the near term. United Breweries realised weighted average price increase of ~5% in Q4 FY23 (~6% in FY23), which will serve it well going forward along with its continued focus on pursuing further price increases.
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