Sell United Breweries; target of Rs 820: Motilal Oswal

Motilal Oswal is bearish on United Breweries recommended sell rating on the stock with a target price of Rs 820 in its research report dated August 17, 2020.

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August 20, 2020 / 13:37 IST

26 Aug, 2025 12:21

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Motilal Oswal 's research report on United Breweries

United Breweries (UBBL)'s results were worse than our expectations. Its outlook remains weak, with: (a) June volumes down 57% YoY, (b) lockdown in various urban centers thus far in 2QFY21, (c) no repeal of excise duty increase in the majority of the states (which saw a steep excise increase in May), and (d) the continued likelihood of closure of on-trade sales for a few more months. - As highlighted in our Alcobev downgrade note in May'20, we expect FY20-FY22 to be 'lost years' for alcobev players, which are severely affected by a weak demand environment in FY21. Moreover, recovery in FY22 is also unclear due to: (a) an unprecedented steep excise duty increase threatening both net sales growth and profitability for the next few quarters and (b) the risk of weak state finances leading to delay in payments, thereby increasing receivables.

Outlook

Its stock is the most expensive in our coverage universe at 82x FY22 EPS, with ROCE at ~10% even in FY22. Maintain Sell, with TP of INR820.

For all recommendations report, click here