Nuvama initiates coverage on United Breweries with 'buy', sees 22% upside – here's why
₹1,806 apiece. Despite the company's shares underperforming this year, domestic brokerage firm Nuvama Institutional Equities has remained optimistic about the firm's long-term prospects. It has a 'buy' rating on the stock with a target price of ₹1,935 apiece, indicating a 22.31 percent upside.
The brokerage points out that the company has been dominating the beer market, with its share consistently above 50%. Many players have forayed into the beer market in recent years, piggybacking the launch of innovative drinks such as craft beer. United Breweries has coped well with the new entrants by launching its own set of craft beers and other innovative products in order to compete and retain its market share.
The brand power of Kingfisher is very strong, while the innovation pipeline of Heineken is still under-leveraged. Given a new team along with growth opportunities in the beer category, it can be a space to watch out for, for more innovations, the brokerage underscored. According to the brokerage, per capita of beer consumption in India (as per alcohol concentration) is about 4.8 litres a year.
This figure is five–six times higher in most markets in Asia and 20–30 times higher in Western markets. The average beer consumption in India is extremely low in comparison with other global markets. The contribution of beer within alco-beverages (as per alcohol consumption by volume in CY21) in India is currently 41%, versus the world average of 63%.
In countries such as Germany, China, the USA, Brazil, and Russia, this number is more than 75% each. Wine and beer are expected to gain a larger share of the Indian market, both through market expansion and by nibbling market share away from spirits, the brokerage stated. Beer (which
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