USL: A High Spirited Performance

United Spirits surprised the street by posting a strong performance for the December quarter of 2012. The company posted a topline of Rs 2202.68 crore and a bottomline of Rs 80.55 Crore as against Rs 1967.34 crore and Rs 47.06 Crore respectively in the December quarter of 2011. Its performance was good on a sequential basis too. Though the topline for the December quarter of 2012 was marginally down as compared to Rs 2236.77 crore in September 2012, the bottomline for the quarter was significantly up as compared to the Rs 39.27 crore it earned in the September quarter of 2012. The net profit for the December 2012 quarter has been also much higher than Rs 65 to Rs 67 crore in which it was expected to fall.

This strong performance of the company was backed by a good volume growth particularly in the premium brands. These witnessed a strong volume growth of 29 per cent, the company having sold 7.92 million cases during the December quarter of 2012 as against 6.12 million cases it sold in the December quarter of 2011. This growth of 29 per cent has been much ahead of the average growth of 11 per cent recorded by the industry.

In the regular and below brands, the company managed to sell 24.66 million cases in the December quarter as against 24.39 million cases it had sold during the same period last year. Growth in this segment, at 1 per cent is lower than the average industry growth of 2 per cent.

It is the premium brands that have helped the company put in a better performance.  For instance, in the scotch segment it sold 0.12 million cases up 40 per cent on a YoY basis. Also, in the premium Whiskey segment it managed to sell 1.20 million cases (Up by 10 per cent). In the other premium brands, it managed to sell 0.17 million cases (up 227 per cent) while in other prestige brands the sale at 6.43 million cases was up 31 per cent on a YoY basis. In all the premium brands its growth was significantly higher than the average industry growth.

With a strong performance from the premium brands category and sustained sales in the below segment, the margins for the quarter have increased by more than 200 basis points. For the December quarter of 2012 its EBITDA margins were 12.50 per cent as against 10.20 per cent in December 2011 and around 12 per cent in the September quarter of 2012. The EBITDA margins were higher despite spirit prices having witnessed an increase of Rs 2.1 per litre or Rs 8.40 per case.

The overall performance of the company has been very strong and is better than street expectations. The stock may witness a good up-move from here following these good set of numbers that the company has put up. High risk taking investors can take an exposure to the counter with a medium term perspective.