Jefferies upgrades Smirnoff-maker to “Buy”; Nomura sees 26% upside on ready-to-drink push

Global investment bank Jefferies has upgraded its rating on United Spirits to “Buy” from “Hold”. The bank also raised its target price for the stock by nearly 4% to Rs 1,620 apiece. This implies an upside of 20% from the stock’s closing price of Rs 1,346.20 on Monday.

Japanese brokerage Nomura retained its “Buy” call on the stock while raising the target price by 6% to Rs 1,700. This reflects an upside of 26%. Both Nomura and Jefferies attributed the positive outlook to growth in volumes and an improving outlook for the second half of FY27.

Jefferies has forecast a 9% volume growth for prestige & above (P&A) in the second half of the year, against a fall of 1% in the first half. The company’s management remains confident of double-digit P&A value growth for FY27, on a favourable base, easing regulatory headwinds, and the recovery in relaunched McDowell’s, which accounts for almost 60% of its volumes.

The free trade agreement between the UK and India has improved the affordability from duties on scotch with J&B relaunched across around 60% of salient markets. McDowell’s renovation has reached 80-85% of salient markets, with packaging interventions underway to improve traction.

Jefferies said Smirnoff remains on track for over Rs 1,000 crore net sales value for FY28, supported by new flavours and the launch of Smirnoff Ice ready-to-drink.

The company remains well positioned to leverage its premium portfolio, innovation pipeline, and global Scotch brands, while a sustained recovery in McDowell’s presents further upside potential.

“Growth was led by Smirnoff innovations, J&B Scotch relaunch and luxury momentum, while Smirnoff Ice marked its entry into RTDs. Management maintained its double-digit FY27 P&A NSV growth aspiration, aided by Maharashtra normalisation, McDowell’s recovery, premiumisation and innovation,” Jefferies said.

The brokerage expects volumes to improve as P&A growth will revert to “double digits” in the second half and the full benefit of the festive demand kicks in.

The relaunch of the J&B whiskey is also expected to support growth. “J&B whisky relaunched (60% of national salience) as a 100% Scotch at a very attractive price point enabled by FTA, to recruit new consumers and deepen Scotch penetration ahead of peak festive season. Being a Diageo global trademark, it sits within the 10% margin cap,” Nomura said.

The company’s trademark vodka, Smirnoff, is growing strongly and is on track for the Rs 1,000 crore net sales value aspiration for FY27. The Smirnoff Ice ready-to-drink will increase consumption occasions and draw from beer and wine and also has a three times multiplier to core brand as drinkers graduate.

Brokerages remained positive on the company as volumes are expected to improve in the second half of the year. New flavours in Smirnoff, along with a ready-to-drink launch, and the relaunch of the J&B whiskey are expected to drive growth in coming quarters.

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