Mehabe score: 5 G Factor: 3 Piotski Score: 5 The stock has a rating OBSERVE & HOLD. The mehabe team score is reflective of its fundamental and technical merits. A rating above 8 is considered good buy. The stock has a G-Factor of 3 and Piotski score of 5.
Description
Diageo India incorporated in India as United Spirits Ltd.(USL) is the country’s leading beverage alcohol company and a subsidiary of global leader Diageo PLC. The company manufactures, sells, and distributes a wide portfolio of premium brands such as Johnnie Walker, Black Dog, Black & White, VAT 69, Antiquity, Signature, Royal Challenge, McDowell’s No.1, Smirnoff and Captain Morgan.
Main Points
Change of management in 2015
Diageo PLC took over the majority stake in 2013 #. It started restructuring the company by selling off non-core assets over next few years. This included sale of entire stake in United Brewries (UB) to Heineken #.Site:MCDOWELL-NMain Symbol:UNITDSPR
Stock trades at 651.0, above its 50dma 637.98. It also trades above its 200dma 594.88. The stock remains bullish on techicals
The 52 week high is at 690.00 and the 52week low is at 494.00
Price Chart
P/E Chart
Sales and Margin
Strengths
– has reduced debt.
Weakness
– Stock is trading at 11.49 times its book value
-Though the company is reporting repeated profits, it is not paying out dividend
-The company has delivered a poor sales growth of -0.87% over past five years.
Competition
– The industry trades at a mean P/E of 39.9x. United Breweries trades at the industry’s max P/E of 147.63x. MCDOWELL-N trades at a P/E of 69.5x
– Industry’s mean G-Factor is 4.3 while the mean Piotski score is 9.0. MCDOWELL-N has a G-Factor of 3 and Piotski scoreof 5.
– Average 1 month return for industry is 3.6%. The max 1- month return was given by Jubilant Inds.: a return of 27.02 %
Quarterly Results
Sales for period ended Jun 2021 is Rs 1722.0 cr compared to Rs 1032.0 cr for period ended Jun 2020, a rise of 66.9%
Company reported operating profit of Rs 188.0 cr for period ended Jun 2021, operating profit margin at 10.9 %.
Operating profit was negative for the same period last year thus company has improved its margins this year
The EPS for Jun 2021 was Rs 0.76 compared to Rs 2.87 for previous quarter ended Mar 2021 and Rs -3.32 for Jun 2020
Profit & Loss Statement
Profit&Loss Comments
Company reported sales of Rs 8821.0 cr for period ended TTM vis-vis sales of Rs 8131.0 cr for the period ended Mar 2021, a growth of 7.8%. The 3 year sales cagr stood at -1.9%.
Operating margins expanded to 15.0% for period ended TTM vis-vis 13.0% for period ended Mar 2021, expansion of 200.0 bps.
Net Profit reported at Rs 681.0 cr for period ended TTM vis-vis sales of Rs 384.0 cr for the period ended Mar 2021, rising 43.6%.
Company reported a poor Net Profit CAGR of -0.9% over the last 3 years
Balance Sheet Statement
Cash Flow Statement
Cash Flow comments
CashFlow from operating activities was positive.
CashFlow from operating activities: Rs 1818.0 cr for period ended Mar 2021 vis-vis Rs 783.0 cr for period ended Mar 2020
Sales Growth
Profit Growth Statement
Profit Growth Statement
Stock Price CAGR
Return of Equity
General Comments
– The company has worsened on its Return on Equity (RoE) metric. The RoE on Last Year basis was 10.0% compared to 17.0% over the last 3 Years. – The stock has given a return of 12% on a 1 Year basis vis-vis a return of 2% over the last 3 Years. – The compounded sales growth on a TTM bassis is 11% vis-vis a compounded sales growth of -2% over the last 3 Years. – The compounded profit growth on a TTM basis is 136% vis-vis a compounded profit growth of -12% over the last 3 Years.
Ratios
Shareholding Pattern
– FII shareholding has remained largely constant. The Jun 2021 fii holding stood at 18.98% vis-vis 18.88% for Mar 2021 – Public shareholding has remained largely constant. The Jun 2021 public holding stood at 14.33% vis-vis 14.66% for Mar 2021
Conclusion
– has reduced debt. – Stock is trading at 11.49 times its book value
-Though the company is reporting repeated profits, it is not paying out dividend
-The company has delivered a poor sales growth of -0.87% over past five years.
Fundamentally, the stock remains weak on business fundamentals. Weak near term results have dampened and questioned business drivers. We suggest to wait for a upturn in business performance.
Technically, the stock trades above its 50 DMA 637.98 and is trading at 651.0 It has shown near term bullish momentum contrary to business fundamentals. We suggest to observe price action. However as investors, who like to avoid timing the markets, we suggest to avoid the stock
