Buy United Breweries; target of Rs 1225: Emkay Global Financial

Emkay Global Financial's report on United Breweries

West Bengal reduces taxes on beer, driving consumer prices down by 24%-30%: Following tax reversals by Delhi, Odisha and J&K, West Bengal has also reduced taxes by withdrawing the 30% additional VAT on beer, resulting in a steep 24-30% fall in consumer prices. A 650ml bottle of mild beer is now priced at Rs119 vs. Rs170 earlier, whereas strong beer is priced at Rs130 vs. Rs170 earlier. This is the sharpest cut in beer prices in WB and the lowest prices in the last 3-4 years.

Outlook

However, with most states reversing steep taxes, regulatory environment is turning benign and further unlocking can drive a sharp recovery in industry volumes and profitability from Q3, in our view. Valuations at 42x/34x FY22/23E appear attractive. We reiterate Buy with a TP of Rs1,225.

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