Investors shouldn't ignore downside risks, high valuations of UBL

Loss of peak season sales suggests tough recovery

The stock of United Breweries (UBL), the maker of popular beer Kingfisher, has gained 25 per cent since its March lows, underperforming the 38 per cent rise in shares of United Spirits (USL) during the same period. Though the long-term growth story of UBL and USL remains intact, near-term recovery for UBL's pandemic-hit sales is likely to be tougher as compared to USL. Thus, the UBL stock, which is trading at a price-to-earnings multiple of over 100 times its FY21 estimated earnings (double USL's valuation), could witness higher pressure as seen in the past few trading sessions.

To begin with, while