Motilal Oswal is bullish on United Spirits has recommended buy rating on the stock with a target price of Rs 700 in its research report dated July 23, 2019.
Motilal Oswal's research report on United Spirits
Standalone net sales grew 10.4% YoY to INR22.2b (v/s our est. INR22.3b). Net sales excluding sale of bulk scotch grew 6%, impacted by the general elections. Reported volume growth stood at 6% YoY (v/s est. of 8% YoY); underlying volume was up 7%. Prestige & above volumes grew 8% YoY, while Popular volumes were up 4% YoY (underlying* Popular volumes up 5% YoY). EBITDA grew 66.4% to INR4b (v/s est. of INR2.7b). Underlying EBITDA grew 42% YoY. Adjusted PAT grew 88.5% to INR2b (v/s est. of INR1.3b).
Valuations of 35.5x FY21EPS and 21.9x FY21EV/EBITDA are at a slight discount to consumer peer average, despite better earnings visibility. Compared to alcohol peers, UBBL, UNSP's valuations are at 25% and 10% discount on P/E and EV/ EBITDA, despite better earnings growth prospects and better ROCEs. Maintain Buy with DCF-derived TP of INR700.
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