Return to site

United Spirits Limited

Diageo at work......

            CMP Rs 2520(FV10)                           Analyst : Janak Shah (M.B.A. Finance)

            Market Cap Rs 36663 crs                 Date: 18th March 2016

            Target : Rs 3100                                Time frame : 1 year target


About the Company:

United Spirits was promoted by the UB group headed by Dr Vijay Mallaya. The stake of Dr Mallaya was sold to Diageo and then it became a Diageo company. Now it is a multinational company with global presence.

Alcohol Industry:

Indian beverage alcohol market has total net sales of INR382.5mn. Out of this, western style accounts for 55%, of which 92% is IMFL.  Spirits category is classified into 4 broad price segments: Luxury, Premium, Prestige and Popular.

 During FY15-16, Indian branded alcoholic spirits industry, at ~312mn cases (each case

equal to 9 bulk litres), was only marginally up from 307mn cases in FY14.

 Overall whisky category in India grew by 4% YoY in FY15. It is projected to grow from

175mn cases in 2013 to 270mn cases in 2023. Alcohol penetration in India is 42% and whisky penetration is around 23%. India has low per capita alcohol consumption at 3.6 litres and per capita hard spirits(non‐beer alco‐bev) consumption is 2 litres, implying scope for growth (per capita spirits consumption in India increased from 1.6 litres in 2003‐05 to 2.2 litres in 2010‐12). The Premium segment looks most promising, followed by Prestige and Luxury clocking CAGR (2011–16) of approximately 18%, 15% and 10%, respectively; Popular is slowing, posting CAGR of 4% (2011–16).


The products of the company include Royal Challenge, Mc Dowell No 1, Johnnie Walker, Haywards, Black Dog etc. It has lot of brands in Vodka, Gin, Rum etc.


The company has  a  book value  of over Rs 201 per share. The company for the year 2015 posted sales of Rs 8049 crores and Net loss was nearly 1956 crores. The company might end up with a profit of 1000 plus crores this year but in 2016-17, the company may bost sales of over 11000 crores and EPS will be 65 per share. The company has been carrying out certain stake sales, selling properties of Dr mallaya which will reduce the debt of the company.

In the next 1 year the balance sheet will be strong and it will be out of BIFR. ( the company had gone to BIFR as half of the net worth was eroded)

Equity Holding:

Promoters hold about 58.77 % and   the public holding is about 41% .

Comparisions to Peers:

The company can be compared to Radico Khaitan Limited, Tilaknagar Industries, GM Breweries Limited etc. The only fact is that United spirit has a market cap of 36600 crores roughly as compared to the listed Radico which has a market cap of less than 1300 crores.

 Investments Rationale:

Alcohol is tipped to be the most profitable business in FMCG terms if managed well. United Spirits was formerly run by Dr Mallaya and now by Diageo which will make a huge difference. Now the company will be very professionally managed in terms of professional people, multinational setup. The brands Black Label and Red Label are well known world over. The company will also increase prices regularly and will regain the lost glory once again to conquer new heights.

Price Targets:

At current price of Rs 2520 per share the company is available at a very decent valuation as Diageo themselves got in at Rs 3000 plus for their stake in the company. The company had hit a high of 4000 plus this year and after this massive correction due to the problems faced by the company in its transition cycle, it is now a screaming buy. The problems seems to be subsiding and the script is poised to be a multibagger in the long run.

( Disclosure: The analyst has no holdings direct holdings but family holdings  in the shares on date of publication of the issue)

The analyst is a sebi certified research analyst. Registration No: INH000001717

All Posts

Almost done…

We just sent you an email. Please click the link in the email to confirm your subscription!

OKSubscriptions powered by Strikingly