New beer launch expected to boost United Breweries share price by 20%

Heineken Silver Draught Beer will be launched exclusively in premium bars and pubs across Mumbai, Thane, and Pune in Maharashtra, with plans to expand to Karnataka in the fiscal year 2024.

“This launch is a meaningful expansion of United Breweries’ portfolio and shows its intent to focus on innovation,” said Nuvama nstitutional Equities.

This variant has already garnered immense appreciation in global markets. 

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“We see this as another segmentation and premiumisation step by UBBL. It shall be marketed as a premium and smooth beverage for social occasions and is crafted by seasoned brewers utilising only natural ingredients, including Heineken’s renowned unique A-yeast and 100% malt,” Nuvama Equities noted.

The brokerage maintained a ‘Buy’ rating on United Breweries with a target price of ₹1,935 per share, implying an upside of 20% from Tuesday’s closing price.

The brokerage house remained positive on the Kingfisher beer manufacturer for a slew of factors that it believes will aid the company’s growth.

Analysts at Nuvama believe the appointment of new MD & CEO Vivek Gupta uncorks a renewed steady push.

The brokerage is of the view that the worst of gross margins is behind given that the company has almost utilised its high-priced inventory in Q2FY24. This along with a correction in barley on a year-on-year (YoY) basis would help the company improve gross margins.

Moreover, in the past one year, a few state governments have rationalised policies for beer makers, reduced taxes and revised tax rates favourably (vis-à-vis spirits). Recently, representatives of the beer industry approached the Maharashtra government, seeking a reduction in excise duty on beer, which is currently under review.

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“Maharashtra is a meaningful state in terms of beer consumption; if it rationalises tax policies, it will be a big boost for the industry,” said Nuvama Institutional Equities in a report.

Additionally, glass prices have been under inflation for the past few years and have been affecting the margins of alco-beverage players. Nuvama Equities expects glass costs to rationalise Q4 onwards. 

Lastly, it believes the beer market is poised to experience a significant increase in volume in the near future as a result of the resolution of one-off issues, favourable policies by a few state governments and the increasing acceptance of beverages with reduced alcoholic content in India.

United Breweries share price has gained just 6% in the past three months, while the stock has fallen 4.5% year-to-date (YTD).

At 9:35 am, United Breweries shares were trading 0.48% higher at ₹1,618.00 apiece on the BSE. 

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Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.

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Updated: 29 Nov 2023, 09:41 AM IST