United Spirit is India’s largest potable alcohol company. The company’s strategy to focus on premium products and appoint franchisees for less attractive states has lead to margin improvement. The business has very high entry barriers and favorable demographics make this sector very attractive in the long term. However, there are severe state government controls on pricing and distribution due to which earnings get impacted from time to time. These restrictions prevent speedy transfer of cost increases. The company had been severely impacted by the lock down but consumption is coming back to normal and despite restrictions on gatherings and restaurants, volumes were decent. We have a neutral weight rating due to fair valuations but good growth dynamics once the country emerges from lockdowns – 29-07-2021 Price: 638.10 Rating: Neutral Recommendation: Hold
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