United Breweries (UBBL) reported an above-expectations 3QFY16 partly aided by a low base. Outperformance was driven by higher-than-expected volume growth that flowed through the entire P&L. The earnings press release called out the quarter as an ‘extraordinary’ one on volume growth for the industry; we note that 1HFY16 was weak and so was management’s demand prognosis in the 2QFY16 earnings call.
Outperformance drives upgrades to estimates as well as TP, which stands revised to R750 (from R700). Expensive valuations keep us sellers on the stock.
UBBL reported a strong quarter – revenues up 16% y-o-y to R11.6 billion (KIE: R10.9 billion), Ebitda up 51% y-o-y to R1.83 billion (KIE: R1.46 billion) and recurring PAT up 81% y-o-y to R721 million (KIE: R466 million).
Revenue growth was led by a strong 13% y-o-y industry-level volume growth; we estimate UBBL posted 9-10% volume growth (versus 2.4% decline in 1HFY16, industry volumes had declined 1% y-o-y) and similar growth in realizations (aided by price hikes in AP and favorable mix). UBBL’s volume growth was driven by Kerala, Telangana and Karnataka.