#UnitedSpirits (UNSP)

Management ConCall held on 24 May 2021 after 4QFY21 - Key Takeaways

Source - Yes Securities

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Management Update – Hina Nagarajan will take charge as New MD & CEO from 1st July 2021. Prior to this, she was MD at Africa regional markets at Diageo, 30 years of experience in CPG businesses & worked with various organizations like Nestle, RB, Mary Kay India.

P&A segment–Adjusting for β‚Ή2.5bn revenue of Scotch in Q4FY20, revenue grew ~31% implying strong resiliency of the brands. Scotch segment grew double digit, fastest growing business in portfolio, offset by contraction of owned business in AP, unwinding of franchise business
Brands portfolio – Several initiatives were taken 2 uplift the visibility & brand saliency through new commercial advertisements for Johnnie Walker, Black & White & other brands; available across all country platforms, association with RCB helped enhance visibility of brands
Alcohol industry - behaved as semi essential category and recovered better than non-essential categories.

Productivity – revenue management through premiumization led better mix, price hikes, cost optimization and debt reduction helped optimize cash management.

Gross margin outlook - may decline in coming quarters from the current levels due to inflation in input costs and lower demand for the products led by Covid-led lockdown and higher taxes.

Update on A&P spends and Other expenses - A&P spend 90bps lower in FY21, expect 8-9% as % of sales in FY22. Other expenses stood at 4.5% in Q4FY21; expect it to be 5-6% as % of sales going forward.

Net working capital efficiency –improved to 26% from 30% as % of sales in FY20 driven by improvement in receivables and marginally higher inventory.

Debt Repayment – Significant debt reduction in FY21 of ~Rs1500cr to Rs556cr driven by healthy FCF generated in the business and improvement in working capital. D/E stood at 0.13 vs 0.35 in FY20.

Franchise update – South India business is the biggest part of franchise income, AP is the big component of that, been stable in FY21 except Q1FY21 as there was no business due to complete lockdown

Ethanol blending policy – don’t know when new ethanol blending policy will be announced but company is increasing its own distillation capacity to hedge against uncertainty around the policy

Excise tax update – there is no adverse impacts on operations due to excise taxes, company will be discussing on prices with Karnataka govt. in July 2021

Corporate update – will be reducing the hierarchy levels from 16 to 9 levels, highest level of employee engagement through digital platforms during the crisis

Outlook – Many states are completely shut like Maharashtra creating consumption barrier; barring some supply challenges, company is well positioned to capture the recovery cycle on the back of strong resiliency of the brands.


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More from @MlnDollarMinds

22 May
#UnitedSpirits (UNSP)

4QFY21 Result - First Cut from #GoldmanSachs

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@dmuthuk (1/n)
UNSP reported 4QFY21 of 12% y/y revenue growth

Reported EBITDA growth of 52% y/y due to lower ad spend and lower employee cost

Prestige & Above segment reported a volume growth of 9% y/y. Growth was driven by off trade channel and strong demand for scotch.

Read 9 tweets
30 Apr
Consolidated Revenue +59% YoY to Rs 74940mn
EBIDTA +33% YoY to Rs 8170mn || EBIDTA margins 10.9% v/s 13% YoY
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PBT +43% YoY to Rs 7300mn
PAT +66% YoY to Rs 5680mn (mainly on a/c of lower YoY tax rate at 22.2% v/s 32.6% YoY) (3/n)
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4QFY21 Result - First Cut

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Standalone Revenue increased by 61.1% YoY to INR 71.3bn. (Consensus Estimate : 70bn)

EBITDA grew by 32% YoY to INR 7.9bn with EBITDA margin contraction of 248bps YoY to 11.1%. (Consensus Estimate : 7.4bn)

Read 8 tweets
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Diageo-Backed United Spirit May Sell Mass (popular) Brands
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@dmuthuk @Kiran24Rajput

UNSP, a unit of drinks major Diageo, has tasked investment bank Morgan Stanley to find potential buyers for select β€œpopular” mass-priced brands as it looks to take on French rival Pernord Ricard and adopt a premiumisation strategy

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Smaller players facing credit challenges. A few of the smaller jewelry players are seeing some stress in terms of bank limits, which has not increased for them commensurate to the gold price increase. Nevertheless, several players have done well in 3QFY21.

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Read 13 tweets
27 Feb
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Read 16 tweets

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