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BoFA Securities downgrades United Breweries to ‘underperform’, slashes target to ₹1,850 per share
KV Prasad Jun 13, 2022, 06:35 AM IST (Published)
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Summary
In its report, the broking firm lowered earnings estimates by 2-7%. Even though the stock has rallied and its current valuation seems reasonable, there might not be much upside in the near or mid-term, the brokerage observed.
Shares of beer maker United Breweries Ltd (UBL) gained on Friday even as brokerage house BoFA Securities downgraded the stock to ‘underperform’ due to anticipations of a prolonged recovery in earnings.
BoFA cut the stock target to ₹1,850 apiece, which is a potential downside of over 3% from Thursday’s closing level of ₹1,911.3 apiece.
In its report, the broking firm has lowered earnings estimates by 2–7%. Even though the stock has rallied and its current valuation seems reasonable, there might not be much upside in the near or mid-term, the brokerage observed.
BoFA believes the expected earnings recovery might take a while due to a volatile business environment, so it’s important to keep investments high.
It expects UBL to maintain a low double-digit to teens EBITDA margin or operating profit margin from FY 25–27.
On May 7, United Breweries announced that its net profit surged eightfold to ₹81.6 crore for the fourth quarter ending March 31, 2024.
In the corresponding quarter, United Breweries reported a net profit of ₹9.9 crore. A CNBC-TV18 poll had anticipated a profit of ₹114 crore for the quarter under review.
The company’s revenue from operations rose by 20.8% to ₹2,133.4 crore compared to ₹1,765.9 crore in the corresponding period of the previous fiscal year. A CNBC-TV18 poll had projected revenue of ₹1,986 crore for the quarter under review.
The firm’s EBITDA margin was 6.7% in the quarter under review, as compared to 3% in the corresponding period in the previous fiscal.
The board has proposed a final dividend of ₹10 per equity share with a face value of ₹1 each (1000%) for the financial year ended March 31, 2024, pending approval at the upcoming AGM. If sanctioned by the shareholders, the dividend will be disbursed by August 30.
Shares of UBL were trading 1.12% higher at ₹1,933.35 apiece on the BSE around 11.55 am.
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