UBL:
It all began with 5 breweries in South India, the oldest of which, Castle Breweries, dates back to 1857. United Breweries, as these breweries were named in 1915, has come a very long way. Soon afterwards, the sight of bullock carts carrying huge barrels or 'Hog's heads' containing beer became a household sight. These carts wheeled their way to customers, including British troops living in and around Madras, Bangalore and the Nilgiris. Almost immediately, the brew from UB became a favourite, especially with the British troops. So began the history of beer in India, and the history of United Breweries! The company was bought by the late Mr. Vittal Mallya in 1947, and since then, has consistently tasted success and never looked back. Today, each one of the 89,763 outlets selling beer in India, sell at least one brand from United Breweries. Heineken NV acquires control over Scottish & Newcastle, and Heineken becomes promoter of UB infy_2009. Today, their beer business has shown strong growth and they are the undisputed king of the Indian beer market. Flagship brand 'Kingfisher', has achieved international recognition consistently, and has won many awards at international beer festivals. Most popular beer, Kingfisher Premium Lager beer, is currently available in 69 countries and leads the way among Indian beers in the international market.
UBL is able to grow well. Both United Spirit and UBL combined to make a 40% market share in Indian Brew Industry. UBL is able to grow from 1400 Cr revenue and 63 Cr Profit just 15 years back. Today they are able to make revenue and Profit of 16651 Cr and 300 Cr. We may see this company enter 20,000 Cr plus revenue club in the coming 2 Years.
Post_Covide this industry was affected, but last year growth was again visible. Strong volume growth of 31% was seen across most markets. Price increases in key markets incl Rajasthan,
Telangana, Karnataka, Maharashtra & Uttar Pradesh was seen. Hence the sales growth of strong 27% was seen this year. Positive volume effect on Net Profit is partially off-set by increases in input costs resulting in significant Profit Margin contraction. Hence we saw the fall in profit margin which even continued in Q4_fy23. Fixed cost leverage in employee & other expenses is partially mitigating the negative profit margin development. The margin fell from last year 4.5% to just 0.2% this Q4. Hence this year Net Profit was highly affected and we saw the fall in profits by 17%. Hence we saw the stock in correction mode and despite market is improving we have not seen significant increase in price.
Outlook: Building further category growth while driving the share of premium in portfolio remains a key focus. Hence sales growth of even 15% can be assumed this year fy_24. But Inflationary pressure on cost base is expected to continue in the near term. Hence the margin should be under pressure even in near term quarters. If margin doest not improve we may see the fall in profits even in fy_24 by 87%. Hence, we should be preprepared for the correction to be continued till the margins do not improve.
We remain optimistic on the long-term growth potential of the industry, driven by increasing disposable income, favorable demographics and premiumization. Hence Further we may see strong sales growth of 15-20% growth this decade. Profit margin would also imprive in coming time. Hence we may see UBL reach 25000 Cr sales till fy_2026. New buying can be done in the whole range of 1386 to 1200 and we may see recovery towads the target of 1700 where some 5% profits can be booked. Should not expect breakout in near term till margin improves. Good for long term wealth and can expect multiyear rally here along with high consistent and growing dividends.
Can have 1.25% weightage in the portfolio.
Current promoters are Scottish & Newcastle who are Scotland based have wide experience since the year 1749.
DISCLOSURE: FOR EDUCATION PURPOSES, DO NOT TREAT AS A RECOMENDATION
