P&A outperformance sustains

Company
25 Jan 2024
5 Min read 
  • United Spirits (UNSP) reported a 7.5% YoY revenue growth, with the Prestige & Above (P&A) segment recording a 10% growth.
  •  Overall volume contracted 2% YoY, but P&A volumes increased by 5% YoY.
  •  The popular segment witnessed a decline in value and volume.
  •  Gross margin saw a gradual recovery, but is still below levels achieved in previous years.
  •  EBITDA margin expanded +300bp YoY to +16% despite increased A&P spend.
  •  The company's financials and valuations are projected to improve in the coming years.
  •  The demand environment is muted, but premiumization trends continue.
  •  The company is focusing on its P&A portfolio and launching new products.
  •  Ad-spends are expected to remain elevated in the coming quarters.
  •  The company is looking to offset inflation through internal management productivity and advocating for price increases.
  •  The management maintained the EBITDA guidance of 15% for FY24.
  •  The company's brands and new launches are performing well, particularly in the premium segment.
  •  The company's P&A segment saw strong growth in sales and volumes, while the popular segment declined.
  •  Gross margin and EBITDA margin improved YoY.
  •  The company's valuation is based on a 50x Dec25E EPS and includes non-core assets.
  •  With limited upside, the stock is rated as Neutral.
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