United Spirits shares fall as Macquarie maintains 'underperform'

United Spirits shares have been on a decent run, rallying almost 40 percent since the start of the year.

Shares of United Spirits Limited were off to a weak start on the bourses on October 18 after it fell over a percent to Rs 1,507 after Macquarie maintained its 'underperform' recommendation on the counter citing stiff competition may likely hamper growth prospects.

With a price target of Rs 1,100, the international brokerage forecasts a downside potential of 28 percent from the last closing price of Rs 1,528. United Spirits shares have been on a decent run, rallying almost 40 percent since the start of the year.

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The international brokerage suggests that Pernod India, a key competitor, has indicated that it is outpacing the industry, reporting 2 percent sales growth in the September 2024 quarter. Pernod expects this sales momentum to fully reverse in the quarter ending December 2024, with strong growth anticipated for the fiscal year ending June 2025.

India has become the largest market by volume and the second-largest by value for French spirits giant Pernod Ricard, known for brands like Absolut, Chivas Regal, and Glenlivet. Pernod Ricard's Indian portfolio also includes well-known IMFL brands such as Royal Stag, Blenders Pride, and Imperial Blue. India now accounts for 12 percent of Pernod Ricard’s global revenue, with the U.S. remaining the company's top market by value.

As per reports, Pernod Ricard India (PRI) reported consolidated revenue of Rs 25,039.47 crore for the fiscal year ending March 31, 2023. Although not publicly traded, the company is second only to United Spirits, owned by Diageo, in the Indian market.

In the first quarter of FY25, United Spirit's net profit grew around 2 percent year over year to Rs 485 crore, up from Rs 477 crore. Revenue also rose 3.5 percent to Rs 2,761 crore, up from Rs 2,667 crore in the corresponding quarter of the preceding fiscal year.

Even though the topline and bottom line growth seems modest, it was still above what most brokerages anticipated. The company's growth was anticipated to be weak on year due to inflation's impact on price-sensitive consumers.

At about 9:20 am, shares of the company were trading at Rs 1,510, lower by 1.3 percent from the last close on the NSE.

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