United Breweries Ltd Research ReportQ3FY21

Sharp QoQ recovery in volumes United Breweries (UBL) continued its upward performance trajectory in Q3FY21, leading to 85% normalisation in volumes (up 31% QoQ). The recovery in volumes was further assisted by a better state mix and benign input costs, leading to better-than-expected EBITDA margins (13.4% vs. 9% estimated and 4.5% in Q2FY21). Also, adjusting for the | 23 crore nonrecurring provision created for doubtful debtors/potential expiry of stock, EBITDA margins reached 15.6% levels. Subsequently, absolute EBITDA came in at | 174 crore (up 3.3 x QoQ but down 21% YoY). The company also recorded an exceptional income of | 55 crore due to transfer of its rights and interest in a leasehold land property. Normalisation in on-trade channels to provide further boost On-trade channels (pubs, restaurants) saw limited footfalls during the quarter (restriction placed to follow social distancing norms). The channel contributes ~20% to the volume base for UBL. Beer being bulky in nature and requiring refrigeration, suffered with respect to liquor in the Covid scenario of greater in-home consumption.