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Nirmal Bang Report
For three consecutive quarters United Breweries Ltd. has done well on volume growth, premiumisation and market share growth. We expect this momentum to continue. This momentum alleviates a key investor concern that had emerged in the summer season last year when United Breweries had witnessed an unprecedented market share loss, a large chunk of which has been recovered (including a 130 bps gain in Q4 FY24).
With a likely strong summer season this year, demand outlook in the crucial Q1 period (which contributes ~35-40% to fullyear Ebitda) seems very good.
Margin recovery is taking more time than expected due to higher new bottle mix, weaker state mix and a spate of new launches.
With initiatives underlined by the new CEO, Mr. Vivek Gupta, to grow the business and relatively benign excise environment compared to the past, we believe that the momentum in topline could potentially be much stronger than historical levels even if some investments being made result in a delayed recovery in Ebitda margin.
With the momentum in sales and volume picking up and commodity costs benign, we expect healthy earnings growth over the next two years (~60% Ebitda compound annual growth rate over FY24-FY26E). Maintain Buy.
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