Macquarie has outperform on United Spirits, target price Rs 547

Macquarie has an outperform rating on United Spirits with a target price of Rs 547. The stock ended up 3.8% at Rs 571.65 on Monday while the BSE Sensex closed 469.60 points down (-1.51 per cent) at 30,690.02.

United Spirits Ltd., incorporated in 1999, has a market cap of Rs 41538.30 crore.

Investment Rationale


With some state governments incurring a tax shortfall due to the current situation, there is a risk of significantly higher taxes on alcohol beverages, said Macquarie. While a nominal increase in taxes will not impact demand significantly, the brokerage said it will watch out for any disproportionate increase in taxes in the key states. The brokerage expects a flat revenue growth for FY21 for United Spirits.

Financials

United Spirits' key products/revenue segments include Beverages (Alcohol) which contributed Rs 28279.10 crore to sales value (99.18% of total sales); Income From Franchise which contributed Rs 184.80 crore to sales value (0.64% of total sales); Scrap which contributed Rs 28.70 crore to sales value (0.10% of total sales) and Other Operating Revenue which contributed Rs 19.70 crore to sales value (0.06% of total sales) for the year ending March 31, 2019.

For the quarter ended December 31, 2019, the company reported consolidated sales of Rs 2587.60 crore, up 11.81% from last quarter sales of Rs 2314.20 crore and up 2.91% from last year same quarter sales of Rs 2514.40 crore. The company reported net profit after tax of Rs 232.80 crore in the latest quarter.