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Emkay raises target price on UBL after Heineken raises stake by 14.99%

According to Emkay, the valuations at 49x FY23 EPS are still attractive given the upsides opportunity for earnings from faster recovery and positive regulatory changes.

June 23, 2021 / 03:28 PM IST
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Heineken International BV has acquired an additional 14.99 percent stake in United Breweries Ltd (UBL), increasing its from 46.52 percent to 61.50 percent in the Bengaluru-based company.
Heineken got an open offer exemption from the Securities and Exchange Board of India (SEBI) to buy an additional 14.99 percent stake in the company from the Bangalore debt recovery tribunal (DRT).

According to Emkay, this may also exempt Heineken from an open offer, if it intends to acquire the balance 11 percent stake pledged with banks, whenever it is approved for sale.

"The higher stake may result in higher involvement and support from Heineken. However, UBL is an efficiently run company with access to Heineken’s global portfolio. Hence, we don’t see any material benefits immediately," it added.

Despite the steep decline in sales in FY21 amid Covid restrictions, UBL has made sustained investment behind brands and increased footprint for premium brands.

"The annual report also indicates investments in value brands to grow the category, substantial savings in fixed costs and increase in initiatives for water conservation and carbon footprint reduction," said broking house.

Factoring in the annual report details, Emkay marginally tweaked its estimates.


While Q1 will be weak due to the lockdown impact, the broking house sees a faster recovery than the first lockdown given benign taxation and ongoing vaccination.

According to Emkay, the valuations at 49x FY23 EPS are still attractive given the upsides opportunity for earnings from faster recovery and positive regulatory changes.

The broking house maintained a 'buy' rating on the stock and raise the target price to Rs 1,570.

Today, UBL touched a 52-week high but fell sharply thereafter. At the time of writing this copy, the stock was trading at Rs 1,416.85, down 2.74 percent on the BSE.
Moneycontrol News
first published: Jun 23, 2021 03:26 pm

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