Thursday 13 November 2008

Buy United Spirits: Motilal Oswal

Motilal Oswal has recommended a buy rating on United Spirits in its November 5, 2008 research report. "Volumes are expected to grow at 12% CAGR in the long term and outlook with respect to regulatory changes continues to be positive. Raw material prices are expected to ease off on back of sharp decline in crude prices. Molasses prices are expected to ease from the beginning of crushing season in Nov 2008. USL has domestic borrowings of Rs 14 billion and international borrowings of USD 619 million (Citibank) and GBP 325 m (ICICI Bank)."

"The overall cost of borrowing from Citibank is Libor + 250bp (total cost including hedge is 8.5%). Repayment of Citibank loans will start in FY10 and internal cash generation and cash in hand is adequate for repayment in FY10. We are downgrading EPS (excluding treasury stock) estimates for FY09 from Rs 56.6 to Rs 47.6 and for FY10 from Rs 77.6 to Rs 67.6. The stock is trading at 18.7x FY09E EPS of Rs 47.6 and 12.8x FY10E EPS of Rs 67.6. Buy," says Motilal Oswal's research report.

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Source: Moneycontrol

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DISCLAIMER: The author is not a registered stockbroker nor a registered advisor and does not give investment advice. His comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to buy or sell a stock, option, future, bond, commodity, index or any other financial instrument at any time. While he believes his statements to be true, they always depend on the reliability of his own credible sources. The author recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction, before making any investment decisions, and that you confirm the facts on your own before making important investment commitments.