Sell United Breweries, target price Rs 1130: Motilal Oswal

Motilal Oswal has sell call on United Breweries with a target price of Rs 1130. The current market price of United Breweries Ltd. is Rs 1422.8. Time period given by analyst is one year when United Breweries Ltd. price can reach defined target.

United Breweries Ltd., incorporated in the year 1999, is a Large Cap company (having a market cap of Rs 37664.51 Crore) operating in Beverages - Alcoholic sector.

Financials
For the quarter ended 30-06-2021, the company reported a Consolidated Total Income of Rs 1125.63 Crore, down -27.67 % from last quarter Total Income of Rs 1556.30 Crore and down -10.97 % from last year same quarter Total Income of Rs 1264.30 Crore. Company reported net profit after tax of Rs 30.94 Crore in latest quarter.

Investment Rationale
The historical pre-COVID PBT CAGR in the five years ended FY20 was just ~8.5%. Hence, even post normalcy, earnings are unlikely to witness strong growth. Return ratios even in UBBL’s best year (FY19) were at 18–19% levels, much lower than the Consumer peer average of over 30%. The brokerage maintains Sell, with TP of INR1,130/share, implying a 20% downside (targeting 25x Sep’23E EV/EBITDA).

Promoter/FII Holdings
Promoters held 72.7 per cent stake in the company as of June 30, 2021, while FIIs held 9.8 per cent, DIIs 11.3 per cent and public and others 6.2 per cent.