Despite promising growth prospects, the shares of United Spirits experienced a decline.

This report was created by OXShare

United Spirits, a major company in India’s alcohol market, experienced a 6% drop in its shares on Friday due to underwhelming financial results for the September quarter. The earnings report revealed a 1.4% decrease in revenue and a significant 13.6% decline in Profit After Tax (PAT). As of 11:28 a.m. IST, the stock was being traded at ₹1,031.80 on the National Stock Exchange.

The company has had a strong year, with its stock increasing by 29%, which is better than the Nifty 50 benchmark. This positive trend is predicted to continue due to the company’s strategic plans and strong market position. Diageo, the company that manages United Spirits, is making changes to improve efficiency and profitability. These changes involve adjusting brand promotion strategies, improving the supply chain, prioritizing a lean portfolio, cooperating with the government, and enhancing the work environment.

Motilal Oswal Financial Services has raised its forecasts for United Spirits’ Earnings Per Share (EPS) in the fiscal years 2024 and 2025 by 8.7% and 10% respectively. They anticipate improvements in EBITDA margin due to the company’s decision to reintroduce important brands and expand popular segments through franchising. This strategy is regarded as advantageous by the firm.

Nevertheless, United Spirits has persevered through obstacles posed by increasing costs and high inflation, specifically impacting less prestigious and sought-after product categories. Despite these difficulties, the company has successfully achieved modest growth rates over the past half a decade.

HDFC Securities has identified United Spirits as one of its top stock picks for Diwali. This is primarily because of the company’s strong emphasis on increasing profitability through a consistent growth in revenue, continued investment in advertising and promotions, enhanced pricing strategies, a favorable product mix, and improved efficiency. Investors are recommended to purchase the stock within the price range of ₹915-₹1,040, with a target of ₹1,195.

United Spirits, despite facing recent setbacks in its quarterly earnings, continues to be a formidable player in India’s liquor industry. This is attributed to its substantial market share and the strategic advantages it gains from the management of Diageo. The company’s performance is greatly influenced by factors such as the prices of raw materials and the timelines of the India-UK Free Trade Agreement.