16th February, 2024

INVESTMENT
IDEAS
UNITED SPIRITS LIMITED CMP: 1126.00 Target Price: 1331 Upside: 18%

VALUE PARAMETERS Investment Rationale:

Face Value (Rs.) 2.00 Ÿ United Spirits is the country's leading beverage alcohol company and a
subsidiary of global leader Diageo plc. The company manufactures, sells and
52 Week High/Low 1148.65/730.90
distributes a portfolio of premium brands. It has 37 manufacturing facilities
M.Cap (Rs. in Cr.) 81899.71
across states and union territories in India and has strong distribution
EPS (Rs.) 17.48 network and a state-of-the-art Technical Centre.
P/E Ratio (times) 64.42 Ÿ• The company`s key portfolios, starting with its IMFL portfolio and upper
P/B Ratio (times) 12.03 Prestige segment continue to make steady progress. The renovated bundle of
Antiquity Blue is performing well in the launched markets and adding to the
Dividend Yield (%) 0.00
steady strong performance of Signature and Royal Challenge American
Stock Exchange BSE
Pride. The new bundle has garnered positive appeal across all age cohorts on
the back of impactful visibility and penetration driven by the Hipster pack.
SHAREHOLDING PATTERN Ÿ• Its Royal Challenge American Pride, continues to be its fastest-growing
innovation. It has expanded the brand to 3 new markets: Himachal,
Arunachal and Uttaranchal.

Ÿ• The company`s global brand portfolio continue to witness healthy

premiumization trends with the premium and luxury offerings growing
ahead of the mainstream Prestige segment and repertoire behavior
continuing at the top end.

Ÿ• The company has hosted the most talked about launch event of Don Julio, its
global tequila brand, in Mumbai and Gurgaon. It was launched in India in
Q2FY2024. The company remains optimistic on the India potential of this
opportunity and the initial response that it has received is encouraging. It
P/B CHART
plans to scale up investments on Don Julio to play the role of a market maker
1800.00 for this segment. The company is confident that it will be able to scale this up
1600.00
and touch milestones similar to its scotch.
1400.00
1200.00 Ÿ• The company is focusing on digital initiatives to drive a connected
1000.00
800.00
omnichannel consumer journey and leveraging the external digital
600.00 ecosystem platform partner to drive consumer resonance.
400.00
200.00
Ÿ• In Q3FY2024, the consolidated net sales stood at Rs. 3,002 Crore, up 8.0%
0.00 YoY, driven by continued premiumisation, and resilient consumer demand.
3-Jul-20

6-Jul-21

6-Jan-22
1-Sep-20

6-Sep-21

11-Jul-22

18-Jul-23
25-Jun-19

11-Jan-23

18-Jan-24
26-Aug-19

31-Dec-19

31-Dec-20

12-Sep-22

15-Sep-23
18-Feb-19

27-Feb-20

8-Nov-21
2-Mar-21

9-Mar-22
23-Apr-19

30-Oct-19

30-Oct-20

14-Nov-22

17-Nov-23
5-May-20

6-May-21

14-Mar-23
12-May-22

18-May-23

EBITDA margin improved to 16.20 from 8.02% same period last year.
EBITDA grew by 118% to Rs.486.40 Crore. The profit after tax was at Rs. 350
9.25 12.00 14.75 17.50 Close Price Crore, up 63%.

Risk
FINANCIAL PERFORMANCE (Rs.in Cr.) Ÿ• Regulatory risks
ACTUAL ESTIMATE Ÿ• Economic Slowdown
FY Mar-23 FY Mar-24 FY Mar-25
Valuation
REVENUE 10,611.60 10,916.98 12,517.68
The company has been generating healthy profit over the years and in Q1FY2024,
EBITDA 1,416.90 1,898.88 2,192.69
it managed to wipe out entire accumulated losses from its book. The focus on
EBIT 1,134.40 1,624.50 1,895.03 continuous improvement and value chain productivity is reflected on its
NET INCOME 959.90 1,283.18 1,480.51 performance. Looking ahead, it remains cautiously optimistic on growth on the
back of sustained investments in its brands and renovation pipeline and the long-
EPS 13.52 18.08 20.37
term India consumer potential. Thus, it is expected that the stock will see a price
BVPS 82.48 96.53 111.18 target of Rs.1331 in 8 to 10 months’ time frame on three year average P/BV of
RoE 10.28% 14.20% 14.54% 11.97x and FY25 BVPS of Rs.111.18.

Source: Company's Website, Reuters & Capitaline

SANSERA ENGINEERING LIMITED CMP: 1032.00 Target Price: 1234 Upside: 20%

VALUE PARAMETERS Investment Rationale:

Face Value (Rs.) 2.00 Ÿ Sansera Engineering is an engineering-led integrated manufacturer of
complex and critical precision engineered components across automotive
52 Week High/Low 1089.00/705.15
and non-automotive sectors.
M.Cap (Rs. in Cr.) 5530.05
Ÿ• Total orders booked during Q3 FY24 was Rs. 1100 crore. As of Dec-23, total
EPS (Rs.) 32.63 order book is Rs.2040 followed by very healthy order booking for global
P/E Ratio (times) 31.63 markets. Almost 58% of new order inflows came in from non-auto segment,
also received major orders from Auto-Tech Agnostic & xEV segment and
P/B Ratio (times) 4.42
remaining 14% from new incremental orders.
Dividend Yield (%) 0.27
Ÿ• On the CAPEX front, it is highly focused on its new generation components.
Stock Exchange BSE
Last two plants which have been commissioned include its electric and
hybrid components plant, Aerospace and Defense plant. Recently, it has also
started construction of a new Brownfield machining facility, which is about
SHAREHOLDING PATTERN
1,50,000 square foot of built-up area. This is largely intended to house all the
aluminum forged and machine product category of components and this
step is in line with its increased long-term sales contribution target of 20%
from xEV and Tech Agnostic products.

Ÿ• According to the company, the construction of new machining facility at plant

11, Bidadi is on track for completion by end of FY24.

Ÿ• During Q3FY2024, it has witnessed broad-based growth across of its

business segments — Auto ICE, AutoTech Agnostic & xEV, and Non-Auto
which registered 25–36% YoY growth in the quarter. Its Auto-ICE segment is
benefiting from the premiumization play in the auto industry with higher
content per vehicle. The EBITDA margin in the quarter expanded by one
P/E CHART percentage point, with operating leverage coming into play. The
1400.00 management of the company expects the growth momentum to continue
1200.00 with an order book for new business at Rs. 200 crores, which is spread across
1000.00 segments.
800.00
Ÿ• The company has devised a 4-pronged growth programme – diversification
600.00
into tech-agnostic products and catering to the xEV opportunity;
400.00
consolidation and strengthening of global market share in the existing
200.00 portfolio; focus on leveraging existing capabilities to diversify further into
0.00 non-automotive businesses and expand the addressable market; and to
5-Jul-23
6-Jan-23

6-Jun-23
14-Jul-22

9-Dec-22

2-Aug-23
19-Jan-22

25-Jan-24
24-Sep-21

16-Jun-22
22-Dec-21

13-Sep-22

29-Sep-23
12-Aug-22

6-Feb-23

31-Aug-23

28-Dec-23
17-Feb-22

6-Apr-23
6-Mar-23
25-Oct-21

20-Apr-22

12-Oct-22

31-Oct-23
24-Nov-21

11-Nov-22

29-Nov-23
21-Mar-22

9-May-23
19-May-22

retain and strengthen technological leadership through continued focus on

engineering capabilities.
3.15 3.80 4.45 5.10 Close Price
ŸRisk

Risk
FINANCIAL PERFORMANCE (Rs.in Cr.)
Ÿ• Economic slowdown
ACTUAL ESTIMATE
Ÿ• High commodity price
FY Mar-23 FY Mar-24 FY Mar-25
REVENUE 2338.30 2789.73 3274.78 Valuation
EBITDA 377.01 481.80 592.32 With a combination of strong tailwinds in its operating segments and its strategic
initiatives, the company is confident to deliver a healthy top line going forward.
EBIT 246.93 337.86 421.46
The company expects its ICE segment to contribute significantly to achieving its
NET INCOME 146.20 206.74 274.21 targets, driven by the growth in component client additions. The newer initiatives
EPS 27.17 38.88 51.85 like aluminum forged and other components are expected to grow at much faster
rate going forward. Thus, it is expected that the stock will see a price target of Rs.
BVPS 223.93 259.57 308.45 1234 in 8 to 10 months time frame on a target P/BV of 4x and FY25 (E) BVPS of Rs.
RoE 13.19% 14.78% 17.18% 308.45.
Source: Company's Website, Reuters & Capitaline
Above calls are published in “Wise Money Issue No. 932”

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