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  • United Breweries witnessing accelerated growth

    Publish Date: September 05, 2018

    The maker of Kingfisher beer, showed a 180-degree swing from year-beginning to year-end, in the previous year. Here are a few points on what contributed towards the stock’s accelerated growth.

    Click here to read about ratios to be considered while analysing stocks

    Earnings on an improved path

    The year didn’t start quite well for the country’s largest beer producer. The year began with the Supreme Court putting a ban on the sale and serving of alcoholic drinks within 500 metres of India's national highways. Then, the GST was introduced. However, with the introduction of the GST, local body taxes in states like Maharashtra were subsumed. Making GST a happy news for the alcohol industry.

    Click here to read about recent changes in GST

    United Breweries in FY2017 experienced volume growth of 10.3%. This was its first the double-digit volume growth since FY 2011. Its flagship brand Kingfisher strong as well as its other premium brands have experienced a considerable growth in sales volume.

    Click here to read about the impact of GST rates on investors

    Good sales volume in many Indian states viz. Telangana, A.P., Rajasthan, Orissa, Tamil Nadu, and Karnataka drove the growth in FY2018. Its sales improved both, domestically as well as internationally. Exports from United Breweries saw a sharp 47X jump to Rs.2.23 billion from Rs.48 million in FY2017.

    Strong Q1 results

    Q1 results of United Breweries showed good numbers. Net revenue was marginally below estimates and grew 11.2% to Rs.1,865.9cr, during the same period. Standalone net profit rose 37.1% YoY to Rs.221.9 crore, in-line with the estimates. EBITDA grew 25.8% YoY to Rs.400.4 crore, broadly in-line with estimates. EBITDA stands for Earnings Before Interest Depreciation Tax Amortisation. EBITDA growth in the case of United Breweries was a result of growth in the volume of sales, lower raw material cost and a reduction in advertising cost.

    United Breweries reported a volume growth of 12% vs. industry growth of 9% YoY. UBL’s net debt level also declined significantly.

    Click here to read about financial ratios and stock analysis

    What do all these numbers mean to an investor?

    United Breweries has shown growth in sales volume for most of its products lately. Its revenue, as well as profit figures, have fallen in line with the estimates. Hence, the stock is experiencing an upward march.

    The previous two years have proved to be quite challenging for not just for United Breweries but for the alcohol industry as a whole. In the long run, the beer shows higher returns. However, as the stocks are too expensive, it would be ideal to sell.

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