Goldman Sachs upgrades United Spirits to buy; stock gains 3%

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26 Aug, 2025 12:21

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United Spirits gained over 3 percent intraday on Tuesday, following a ratings upgrade by Goldman Sachs.

Citing it as a source of opportunity, the research firm upgraded United Spirits to buy from a neutral rating due to better prospects of margin expansion. This is due to an improvement in product mix as well as cost savings undertaken by the company, its report stated.

As a catalyst, United Spirits could see continued margin improvement and lower working capital requirement led by franchising agreements announced in FY17, it said.

Moreover, its strategy to franchise low gross margin brands in non-core areas and renewed focus to renovate Prestige brands is likely to lead to better returns and margins, Goldman Sachs said in its report.

“It has franchised out 15-20 percent of its Popular volumes and is planning on similar agreements for an additional 15 percent over the next few months,” analysts at the firm wrote in their report.

Having said that, liquor bans by regulators as well as non-renewal of franchise agreements could be key risks, it added.

On the valuations front, the research firm increased Fy18-20 earnings per share (EPS) estimates by 19-28 percent to reflect higher margins and increased target price to Rs 2,738, implying an upside of 22 percent. “Consequently, we expect United Spirits to deliver 33 percent earnings CAGR over FY17- 20, significantly ahead of our coverage group at 20 percent,” the report added.

The stock gained 13 percent in the past one month, while its three-day loss stood at around 2 percent. At 10:23 hrs, United Spirits was quoting at Rs 2,280.00, up Rs 33.80, or 1.50 percent on the BSE. It touched an intraday high of Rs 2,319.10 and an intraday low of Rs 2,266.10.