Trend Is My Friend

United Spirits Limited
CMP Rs 951 Target Price Rs 1200

United Spirits Limited is the largest alco beverage Company in India and is also among the largest consumer goods companies. USL has a comprehensive brand portfolio with over about 80 brands of Scotch whisky, IMFL whisky, brandy, rum, vodka and gin. 9 of these brands sell more than a million cases annually USL manufactures, sells, and distributes a wide portfolio of premium brands such as Johnnie Walker, Black Dog, Black & White, VAT 69, Antiquity, Signature, Royal Challenge, McDowell’s No.1, Smirnoff and Captain Morgan.
With USL dominating volume market share of the whisky segment in India, the company is well placed to ride on the rise in consumption of alcoholic beverages in India, driven by the underlying demographic advantage and the change in perception towards alcohol. The business outlook appears promising with trade channels returning to normalcy, increased occasions for home indulgence, the ongoing strategic review of half of the Popular portfolio to be concluded by Dec'21, which would offer further primacy to the Prestige & Above (P&A) segment & potential success in the P&A segment in terms of both growth and margin.
USL’s focus on premiumisation, de-focusing of popular category brands, debt reduction, digital push, cost optimization, better product mix and supply chain management are well reflected in the higher margins and superior growth rate. In Q2FY22 management commentary on demand outlook was very strong indicating stronger traction expected in H2 of FY22. We hence believe that the USL stock would get rerated ahead going ahead.