UNITED SPIRITS

No longer a Vijay Mallya company, United Spirits is a subsidiary of British multinational Diageo plc.

The company has posted a whopping 286% (YoY) jump in net profit at Rs.148 crore on a modest 3% growth in net sales at Rs.2485 crore. This was thanks to the substantial other income of Rs.35 crore, a 15% drop in interest cost and in previous Q3, the company had an exceptional expense of Rs42 crore; all these factors together got the bottomline really pumped up in current Q3.

The company stated that third quarter topline was affected due to de-monetization; Popular segment net sales declined 6%. EBITDA was up 10% at Rs.294 crore, driven by top line growth and lower staff costs.  Margins were up 74bps at 11.8%.

Its 9MFY17 net profit at Rs.274 crore has more than surpassed FY16 net profit of Rs.125 crore. This fiscal is sure to be one big party!

Annualised EPS on equity of Rs.145.33 crore is Rs.25 (FV of Rs.10).

In terms of outlook for alcohol companies, the sector continues to face challenges in the regulatory environment in certain states. Tax and excise changes in Maharashtra, West Bengal and Telangana have led to sharp consumer price increases and the route to market changes in Punjab continues to impact performance. Although the impact of de-monetization will abate in Q4, the recent Supreme Court judgement on liquor outlets near highways remains a risk and adds some uncertainty for the future periods.