United Breweries shares fell nearly 3% on Thursday, 29 October, as investors booked profits after recent gains. Despite this, the company reported a 191% profit surge in Q2FY27. Nirmal Bang said, "We turn more constructive on the stock following a strong Q2FY27," noting potential from volume growth and premiumisation.
United Breweries shares fell nearly 3% after gains as investors booked profits despite strong Q2FY27 results. Profit surged 191% year-on-year and revenue rose 23.7% while analysts see longer-term potential from volume growth and premiumisation.
A day after clocking a healthy gain of 5% and extending gains for the second consecutive session, United Breweries shares declined almost 3% in morning trade on the BSE on Thursday, 29 October. United Breweries share price opened at ₹1,191.35 against its previous close of ₹1,199.75 and declined 3% to an intraday low of ₹1,164.
The stock witnessed healthy gains in the previous session after the company reported its September quarter (Q2FY27) results.
In an exchange filing on 27 September, the company said its Q2FY27 consolidated profit rose 191% year-on-year (YoY) to ₹135.31 crore. In the same quarter last year, the company's profit was ₹46.52 crore.
Revenue from operations for the quarter jumped 23.7% YoY to ₹4,623 crore from ₹3,737.31 crore in Q2FY26.
Brokerage firm Nirmal Bang Institutional Equities has upgraded the stock to a "buy" from a "hold", increasing the target price to ₹1,610 from ₹1,595, as it rolled forward to September 2028E and value the stock at 32 times EV/EBITDA, a nearly 39% discount to its five-year median of 52.6 times.
Nirmal Bang expects United Breweries' revenue, EBITDA, and APAT CAGR of 11.8%, 22.4%, and 29.5%, respectively, over FY26-FY29E.
"We turn more constructive on the stock following a strong Q2FY27, with accelerating volumes, rapid premiumisation, and a visible gross margin recovery driven by structural pricing and productivity initiatives," said Nirmal Bang.
The brokerage firm raised its FY27 and FY28 revenue estimates by 1.7% and 2.7%, respectively, while trimming EBITDA estimates by 2.6% and 2% and PAT estimates by 2% and 9.1%, respectively, factoring in the step-up in commercial investments, persistent input-cost pressure, and the one-off tax-refund interest in Q2FY27.
Nirmal Bang has kept its assumptions in line with the management's 6-7% medium-term volume growth outlook, 43-45% gross margin guidance, and higher brand spends in the second half of FY27.
Brokerage firm Elara Securities maintained an "accumulate" view on the stock but lowered the target price to ₹1,400 from ₹1,500 earlier.
Elara highlighted that while United Breweries' volume growth beat its estimates, normalised volume may be in the range of 6-7%. Elara expects volume growth of nearly 6% each in FY28-29E.
"As per our checks, Carlsberg is turning aggressive on Tuborg and regular beer via better trade schemes to gain market share and remains a key monitorable in the near term. Continued investment in A&P for premium products could weigh on margin expansion," said Elara.
"We raise our FY27-29 revenue estimates by 3.1% and EPS estimates largely unchanged for FY28-29E. Increased competition and inflation in input costs are key downside risks. Privatisation in Tamil Nadu and opening up of Bihar are key upside triggers," Elara said.