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ICICI Securities Report
United Spirits Ltd.'s revenue growth print was decent (but unexciting) (in Q1 FY23) at up 34% YoY with relatively better performance in the Prestige and Above portfolio.
Resilient off-trade channel and gradual recovery in on-trade channel aided overall recovery. Management highlighted scotch supply constraints in select markets.
Costs controls and operating leverage helped deliver underlying Ebitda margin of 13.8% (reported: 12.6%, including one-time employee costs) with gross margins down to 40.9%.
Inflationary raw material is a near-term risk and can lead to some short-term pain (in terms of margins) with United Spirits looking to invest behind premium brands.
As highlighted in our previous note, we believe Unites Spirits's two transactions of brand sales (slump sale plus franchising (for now)) are an attempt to free organisation's resources on what can add more value in the long-term.
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