Buy United Spirits; target Rs 684: Firstcall Research

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Buy United Spirits; target Rs 684: Firstcall Research

Firstcall Research is bullish on United Spirits (USL) and has recommended buy rating on the stock with a target price of Rs 684 in its December 22, 2011 research report.

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Firstcall Research is bullish on United Spirits (USL) and has recommended buy rating on the stock with a target price of Rs 684 in its December 22, 2011 research report.

"United Spirits (USL) is the flagship company of the UB Group - has been the metaphor for the finest spirits produced across the world. During the quarter, USL undertook a GBP 370 million re-finance of the remnant debt originally taken for the acquisition of W&M. During the quarter ended, the robust growth of Net Profit is increased by 98.39% to Rs 1480 million. USL is Market Leader with over 59% market share of India Spirits Business. During the quarter, USL progressively increased its shareholding in Sovereign Distilleries Ltd with a 180 Kilo Liters per Day facility using both molasses & grain as input substrates. Net Sales and PAT of the company are expected to grow at a CAGR of 22% and 19% over 2010 to 2013E respectively."

"The company has reported net profit of Rs 1480 million for the quarter ended on September 30, 2011 as against Rs 746 million in the same quarter last year, an increase of 98.39%. It has reported net sales of Rs 18663.10 million for the quarter ended on September 30, 2011 as against Rs 13655.30 million in the same quarter last year, a rise of 36.67%. Total income grew by 40.43% to Rs 19057.90 million from Rs 13571 million in the same quarter last year. During the quarter, it reported earnings of Rs 11.31 a share."

"At the current market price of Rs 611, the stock is trading at 14.59 x FY12E and 12.48 x FY13E respectively. Earning per share (EPS) of the company for the earnings for FY12E and FY13E is seen at Rs 41.87 and Rs 48.96 respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 22% and 19% over 2010 to 2013E respectively. On the basis of EV/EBITDA, the stock trades at 5.92 x for FY12E and 5.15 x for FY13E. Price to Book Value of the stock is expected to be at 1.42 x and 1.27 x respectively for FY12E and FY13E. We expect that the company will keep its growth story in the coming quarters also. We recommend 'BUY' in this particular scrip with a target price of Rs 684 for Medium to Long term investment," says Firstcall Research report.

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To read the full report click on the attachment