Angel Broking neutral on United Spirits

Angel Broking has maintained a neutral rating on United Spirits in its February 07, 2013 research report. According to the research firm, company's bottom-line is expected to grow at a CAGR of 128% over FY2012-14 led by margin expansion and lower interest costs due to reduction in debts post the UBH-Diageo deal.

"USL posted an 11.3% yoy growth in its standalone top-line to Rs 2,174cr. Overall volumes for the quarter rose by 7% yoy (vs industry growth of 4%) and stood at 32.58 million cases. The volume growth in the prestige and above segments (constituting 24% of overall volume) stood at 29% yoy, indicating the company's focus towards the premium segment. Volumes in the regular segment (constituting 65% of overall volume), de-grew by 2% yoy (vs 6% industry growth in the segment). Despite the increase in ENA (key raw material) prices, the gross margin for the company stood higher by 133bp yoy due to premiumization and price hikes undertaken by it. Advertisement expenses (as a % of sales) too fell by 86bp yoy, resulting in an 185bp yoy improvement in OPM to 11.3%. Interest costs rose by 6.4% yoy to Rs 164cr. The bottom-line rose by 71.2% yoy to Rs 81cr.

Outlook and valuation: We expect USL's bottom-line to grow at a CAGR of 128% over FY2012-14 led by margin expansion and lower interest costs due to reduction in debts post the UBH-Diageo deal. At the CMP, the stock is expensive, trading at 33.9x FY2014E EPS; we maintain a Neutral view on the stock," says Angel Broking research report.

Public holding more than 90% in Indian cos

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