United Spirits Q1 Review - Impressive Results; Sales Momentum To Be Better In H2: Nirmal Bang

Nirmal Bang Report

United Spirits Ltd.’s Q1 FY25 performance (even after adjusting for non recurring factors) was impressive and the management expects double digit sales growth for FY25 led by 6-8% realization/mix growth in Prestige and Above.

The drop in Popular segment’s volume has been far lower in the last two quarters compared to the past. Commentary and reported results on gross margin is also better compared to erstwhile fears on the same that the company had guided for most of FY24, leading up to FY25 as well.

In times of uncertainty and muted earnings growth, the Alco-Bev sector continues to provide better visibility on earnings and with relative tax stability compared to the past, earnings prospects are better than a few years back.

Likelihood of reduction in tax slabs in Karnataka, the largest spirits market in India (clarity likely in the next couple of months), resumption of business in Andhra Pradesh and potential developments on the India-UK FTA (now that elections are over in both countries) are key developments to watch out for, which could have implications on earnings growth.

We maintain Accumulate.

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