Indiabulls Securities has recommended a sell rating on United Breweries, with price target of Rs 112, in its report dated November 11, 2009. The stock closed at Rs 146.65 on November 12, 2009.

"In the last three years the ROE of United Breweries has declined from nearly 12% in FY07 to 5.6% in FY09, which is still high as compared with FMCG sector’s ROE of 55-60% primarily due to operational inefficiency. Moreover, at the current market price, the stock trades at a very high PE of ~52x against the sector’s PE of ~29x. Therefore we believe the stock is extremely overvalued to other FMCG Companies. Besides, UBL has high leverage with its Debt to EBITDA ratio of ~3.5x primarily attributed to its expansion plan and recent acquisitions. Our DCF based valuation (assuming a 13% WACC and a 5% terminal growth rate) gives a fair price of Rs 112, a downside of 23% from the CMP of Rs 145.95. Thus, we maintain our Sell rating on the stock," says Indiabulls Securities Research report.