Sell United Breweries: Indiabulls Securities
Indiabulls Securities Research has maintained its sell rating on United Breweries in its February 24, 2009 research report. “United Breweries Limited (UBL)’s net sales in Q3’09 grew substantially by 24% yoy to Rs 3.7 billion. The EBITDA margin advanced 200 bps yoy to 9.4% in the quarter, from 7.4% for the same period in FY08, on the back of a 243-bps yoy fall in the advertisement and sales promotion costs (as a percentage of sales). We see significant downside in the stock due to high financial leverage and limited expected improvement in margin performance. Moreover, our DCF valuation gives a fair value of Rs 70, suggesting a 10% downside from the current market price (CMP). Therefore, we maintain our Sell rating on the stock,” says Indiabulls Securities’ research report.
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