27 October 2016
Q2FY17 Results Update | Sector: Consumer
Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
Avg Val, (INR m)
Free float (%)
330.7 / 4.9
TP: INR2,800 (+23%)
Financials & Valuation (INR b)
2016 2017E 2018E
EPS Gr. (%)
Operating performance below expectation
United Spirits’ (UNSP) S/L net sales rose 7.7% YoY (est. of +11.5%) to
Gross sales grew 12.7% YoY to INR60.3b; excise duty
increased 160bp YoY. Recurring EBITDA (after adjusting for accounting
reclassification of one-off item of INR280m on restructuring costs that were
clubbed as part of staff costs) stood at INR 2.25b (Ind-AS), down 22.5% YoY
(est. of +8.3%).
Overall 2QFY17 volumes were up only 1% to ~22m cases.
volumes declined 5% YoY, while Prestige and above segment volumes rose 10%
YoY (net sales of Prestige and above portfolio grew 12% YoY).
Gross margin expanded only 40bp YoY to 42.2%,
improvement in mix and price increases taken in Karnataka, the largest
market. Ad spends were up 170bp over a very low base, but lower than the
usual range of ~8-9% of sales. EBITDA margin (excluding other operating
income) after adjusting for one-offs contracted 430bp YoY to 11.0% (Ind-AS),
albeit off a very high margin base in 2QFY16. Adjusting for one-off
restructuring costs, EBITDA (excluding other operating income) declined 22.5%
YoY to INR2.25b (est. of +8.3%).
Adjusted PAT well below expectations:
Other operating income declined
54.5% YoY to INR106m in 2QFY17. Interest costs declined 19.5% YoY to
INR885m, led by debt reduction and favorable rates. PBT fell 23.3% YoY to
INR1.42b. Reported PAT grew 15.9% YoY to INR825m. Adjusted PAT declined
22% YoY to INR978m (est. of INR1.5b).
(Krishnan.Sambamoorthy@MotilalOswal.com); +91 22 3982 5428
(Vishal.Punmiya@MotilalOswal.com); +91 22 3980 4261
Investors are advised to refer through important disclosures made at the last page of the Research Report.
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