United Spirits Limited Q3 FY23 Earnings Conference Call Insights

Key highlights from United Spirits Limited (MCDOWELL-N) Q3 FY23 Earnings Concall

Q&A Highlights:

• [00:19:22] Jaykumar Doshi of Kotak asked about the nature of the program supply chain cost.  Pradeep Jain CFO said MCDOWELL wanted to provide a detailed overview of its multiyear program to accelerate its in-state manufacturing footprint. The costs of this program largely stem from severance pay and write-down of asset values.

• [00:20:55] Jaykumar Doshi of Kotak enquired about the inflationary trends of ENA and Glass Bottle and outlook on GM. Pradeep Jain CFO replied that RMPM still continue to remain inflationary. On GM, MCDOWELL is very similar to last quarter sequentially. It seems to be bottoming out and as the pricing and productivity run rates ramp up, the trend might reverse.

• [00:22:52] Abneesh Roy from Nuvama asked about the medium to long term impact of winning women’s IPL team on MCDOWELL’s brand and revenue. Pradeep Jain CFO answered that the profitability of the women’s IPL is yet to be seen, but it is expected to grow by leaps and bounds. It is seen as a long-term investment for MCDOWELL.

• [00:25:59] Abneesh Roy from Nuvama enquired about premiumization and packaging, if it will be impacted by job losses. Hina Nagarajan MD said that the premiumization story remained very strong and is seeing robust growth that is expected to continue. MCDOWELL is seeing little slowdown in the lower end of Prestige.

• [00:41:31] Percy Panthaki from IIFL asked about the P&A sales, what caused the sudden drop in P&A sales growth and is 10% a good indicator of future growth. Pradeep Jain CFO said Delhi was adding 4-5 points of growth to the national portfolio before October-December 2022, but then reversed and became a negative 1-2. West Bengal also changed their RTM after industry advocacy from 45-50% consumer price increases, which contributed 2-3 points of growth. BIO sales were not fully normalized in this quarter compared to last year, which explains the 23% growth coming down to 12.30%.

• [00:47:39] Percy Panthaki from IIFL asked that taking 14.2% as a starting point, over the next 3-4 quarters, what margin tailwinds is MCDOWELL seeing. Pradeep Jain CFO said it’s difficult to call out. MCDOWELL is pleased with the pricing and expect it to ramp up. MCD is also focusing on productivity improvements and inflation is difficult to predict. Goal is to get back to 15% margin. The supply agility program may not have a significant impact for the first 12-18 months.

• [01:04:29] Alok Shah from Ambit Capital asked about the supply agility program, apart from factory closure or severances, if any other program is happening. Pradeep Jain CFO said that there will be a few other programs, but said doesn’t want to give the minute details.