(Reuters) – United Breweries, the largest beer seller in India, reported a 25% fall in its profit for the third quarter on Thursday, as inflation-wary consumers cut back on spending on its cheaper brands.
The Kingfisher beer-maker’s standalone profit before exceptional items and tax fell to 867.3 million rupees ($9.99 million) in the quarter ended December, compared to 1.16 billion rupees a year ago.
During the quarter, the company incurred a one-time payment of 257.6 million rupees on account of severance pay to certain employees.
The company, majority-owned by Netherlands-based Heineken, reported a near 7% rise in revenue to 4.42 billion rupees. This was slower than the 13% growth recorded in the previous three months and 12% in the corresponding quarter last year.
KEY CONTEXT
Persistently high inflation has forced urban consumers with relatively low disposable incomes to rein in their discretionary spending, although the more affluent consumers continue to splurge.
To cash in on the trend, United Breweries launched a new higher-priced beer, Amstel Grande, in this financial year, which helped drive sales in the reported quarter. It was also aimed at fending off competition from Anheuser-Busch InBev’s Budweiser Magnum and Carlsberg Elephant.
Last month, United Breweries was also at odds with Telangana, briefly halting its supply to one of India’s top beer-consuming state due to delayed payments and a lack of government approval for price increases since 2019/20.
PEER COMPARISON
Valuation (next 12 Estimates (next 12 Analysts’ sentiment
months) months)
RIC PE EV/EBITD Revenue profit Mean # of Stock to Div
A growth (%) growth (%) rating analysts price target yield
(%)
United 65.22 42.47 13.10 44.46 HOLD 12 1.00 0.49
Breweries
United 59.54 40.01 10.93 17.41 BUY 13 0.88 0.65
Spirits
Radico 62.16 37.64 12.98 41.04 BUY 6 0.88 0.14
Khaitan
Tilaknagar 26.15 17.77 -0.81 -7.58 STRONG 1 0.54 0.18
Industries BUY
* The mean of analysts’ ratings standardised to a scale of Strong Buy, Buy, Hold, Sell, and Strong Sell
** The ratio of the stock’s last close to analysts’ mean price target; a ratio above 1 means the stock is trading above the PT
OCTOBER TO DECEMBER STOCK PERFORMANCE
— All data from LSEG
— $1 = 86.8230 Indian rupees
(Reporting by Praveen Paramasivam in Chennai and Ashna Teresa Britto in Bengaluru; Editing by Leroy Leo)
