Contrary to expectations, United Spirits' Q1 FY26E outlook too is expected to be soft. As per the management channel feeling in Q1 FY25 ahead of elections shall lead to soft growth.
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Dolat Capital Report
United Spirits Ltd. over FY23-25 reported modest revenue CAGR of 9.5% (partly aided by Andhra Pradesh) but robust Ebitda/adjusted profit after tax compound annual growth rate of 28/42%.
These have been driven by premiumization, opening of AP and productivity initiatives (mono-cartoons, factory reductions, sourcing etc). United Spirits is likely to face multiple headwinds in FY26 (especially Q2 onwards) on both revenues (Maharashtra, AP forming part of base) and margins (productivity benefits behind).
We thus expect Ebitda/Ebit to decline ~4/5% in FY26E. This shall lead to PE de-rating in our view.
We estimate negative Ebitda impact (vs expectations) of ~Rs 1.5- 2 billion p.a. from Maharashtra alone. We thus reduce our FY26/27E EPS by 13/7% and PE from 60x to 50x standalone FY27E EPS.
Downgrade to ‘Sell' from ‘Reduce' with a revised target price of Rs 1,335 (incl. Rs 125 for RCB) vs Rs 1,675 earlier.
Our FY26/27E EPS is ~19/15% lower than consensus. United Spirits is currently trading at 72/59x FY26/27E earnings per share.
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