United Spirits shares give up Q3 results gains; should you buy this liquor stock? Check target prices

By: |
January 29, 2020 1:48 PM

On the back of the strong December quarter results by United Spirits, most of the brokerages have turned bullish for this liquor stock

United Spirits, United Spirits share price, United Spirits stock price, United Spirits quarter earningsLiquor maker United Spirits reported a 15.2 per cent on-year rise in net profit at Rs 232 crore for the quarter ended December 31

United Spirits share price fell 3.45% today, giving up some of the stellar gains of yesterday following a set of encouraging third-quarter results. On the back of the strong December quarter results by United Spirits, most of the brokerages, Motilal Oswal, HDFC Securities and Emkay Global Financial Services, have turned bullish for this liquor stock, recommending to ‘buy’ the share with an upside of up to 22 per cent.

Liquor maker United Spirits reported a 15.2 per cent on-year rise in net profit at Rs 232 crore for the quarter ended December 31. The company had posted a net profit of Rs 201.4 crore in the year-ago period. While, revenue climbed 2.9 per cent at Rs 2,587.6 crore versus Rs 2,514.4 crore, YoY. At 1.35 PM, United Spirits stock was trading 3.45 per cent lower at Rs 633.75 apiece on BSE.

“UNSP not only reported 8% sales growth in the Prestige & Above (P&A) segment (mainly led by the return of mix improvement and despite a challenging base of 16% growth in 3QFY19) but also ended the quarter with healthy winter and Christmas/New Year eve sales,” Motilal Oswal said in a research note. The brokerage company has given a ‘buy’ rating to the share with a target price of Rs 801, which is a 22 per cent upside. 

Post announcement of December quarter earnings,  Emkay Global Financial Services, had upgraded its rating from ‘hold’ to ‘buy’ with an upside of 12 per cent. The brokerage revised its target price to Rs 735 for 12-months from its previous target of Rs 655. “Increase in spends to boost volumes would be more encouraging, we believe cost savings, particularly in staff and other overheads (down 20% and 12% respectively), have been impressive and higher than expected, thereby providing upsides to our margin forecasts, ” the brokerage said in a research report.

The brokerage company in its research note says that the United Spirits now seems to be in a better position to fight competition. Volume trends have been subdued due to the consumption slowdown, adverse state policies and market share losses possibly. However, these are likely due to cautious trade policies and should recover given UNSP’s improved profitability/cash flows and the better ability to fight competition, ” Emkay Global Financial Services said.

With Diageo’s global market leadership and its dominance in the premium segment, HDFC Securities has given a ‘buy’ rating to the stock with a target price of Rs 759, an upside of around 15 per cent. “Resurgence in demand for the premium segment, moderating raw material inflation and favourable base will drive strong earnings growth. It will further re-rate the stock. We remain believers in the co’s ability to deliver consistent growth and benefit from the category expansion happening in the premium segments,” HDFC Securities said in a research report released post-December quarter earnings.

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