To rectify the situation, the company has devised a medium-term plan to achieve double-digit revenue growth. It has also guided a low-teen operating profit margin, compared with the high single-digit level currently (9.2 per cent in the first quarter, or April-June/Q1 of 2026-27/FY27). The gains are expected to come from a combination of portfolio mix, state mix, and productivity initiatives.
While brokerages are positive on the structural growth story and the company’s targets, they are cautious and await better execution, which will help the company improve market share and deliver on margins going ahead. Until that happens, the stock (₹1,255), which is trading at around 50x its 2027-28 (FY28) earnings estimates, may continue to underperform peers and the broader market.
Double-digit revenue growth is one trend the Street will keep a close eye on. The company has been working on improving top-line growth, as the 6 per cent annual revenue growth over the past three years and 3 per cent volume growth are hardly something to cheer about. The weaker performance is ascribed to its increased reliance on contract brewers in structurally lower-profitability states, as well as its dependence on tie-up units to handle sudden volume surges.
Analysts Nitin Gupta and Ishant Lalwani of HDFC Securities expect ramping up of market supply to be in place and, with the commissioning of the projects in Telangana, Maharashtra, and Uttar Pradesh, the share of revenue from own breweries should expand, helping the company achieve double-digit growth. Maharashtra, Karnataka, and Telangana are the company’s key states, where faster growth could be sustained, they add.
The brokerage has a ‘reduce’ rating, given competitive intensity, and a target price of ₹1,325. Despite historically inconsistent earnings, the stock’s valuation (64x the five-year average forward price-to-earnings ratio) remains elevated, reflecting its dominance in low-alcohol beverages, premiumisation runway, strong consumer traction, and a scarcity premium supported by limited free float and liquidity, it adds.
The other trigger is an improvement in profitability metrics. Gross margins have declined to sub-45 per cent levels from an average of 54 per cent between 2012-13 and 2021-22, restricting profitability at the operating level to single digits. More recently, UBL’s margins remain under pressure due to war-related cost inflation, with an impact of ₹300-500 crore. However, pricing, trade-spend optimisation, procurement and productivity initiatives have mitigated nearly half of the impact, points out analyst Ajay Thakur of Anand Rathi Research.
The company aims to improve its operating profit margin from the current single-digit level to low-to-mid-teen levels. Premiumisation, favourable state mix, localisation, and productivity should aid structural margin expansion.
Anand Rathi Research has reduced its earnings per share estimates by 30 per cent for FY27 and 18 per cent for FY28 due to the company’s underperformance over the past few quarters and the impact of higher input costs on margins on account of the West Asia conflict. It, however, has a ‘buy’ rating on the stock, with a lower target price of ₹1,600 (from ₹2,100 earlier), valuing it at 60x FY28 earnings, compared with 65x previously. The ‘buy’ rating is based on expectations of a visible volume upswing, premiumisation turning margin-accretive, and a sharp recovery in earnings growth.
