Sumit Bilgaiyan
We expect strong double-digit volume growth for United Breweries over the next two quarters, given its low base. Further, we believe that a beneficial competitive environment for United Breweries will drive the company’s volume growth ahead of the industry.
While disruption in West Bengal has increased due to lack of clarity on pricing though primary volumes in Maharashtra are back on track, led by channel restocking.
Further, benefits from operating leverage and continued debt reduction will drive earnings growth. Net realisation per case has grown in line with gross realisation per case for the past two quarters.
We factor strong 20 percent earnings CAGR for United Breweries over FY18-20E and believe that premium valuations likely to sustain and maintain a buy with target of Rs 1265.
Any significant change in the regulatory environment remains a key risk.
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