Brokers’ call: Kim Eng downgrades United Spirits

Kim Eng has downgraded the ratings of United Spirits (USL) to 'Hold' and set a target price of Rs 1,108. The USL stock rallied on confirmation that the company is in discussions with Diageo for a stake sale.

There is high probability of the deal going through this time. This deal is a positive for USL. It will increase credibility, reduce debt and strengthen product portfolio.

However, for now, its PER of 22x FY14F indicates that there is risk of profit taking in the near term if the deal does not take place. Although it remains positive on the outlook due to the impending event, it said it has downgraded it to 'Hold'.