Shares of United Spirits Ltd (USL) rallied over 8 percent in the early trade on Tuesday after it global brokerage Credit Suisse upgraded the stock to ‘Outperform’ from Neutral, with a Target Price of Rs 700 per share.

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The scrip touched intraday high of Rs 626.90 after gaining 8.87 percent on the BSE.

At 10:20 am, the stock was trading 7.53 percent higher at Rs 619.15 on the BSE.

The brokerage said that the near-term pressures for United Spirits are now fully priced in but risk-reward is favorable. The stock now trades at a 10-20 percent discount to FMCG Stocks like Dabur, GCPL and Britannia.

Going ahead, Credit Suisse expects key triggers will be lowering of input costs or price hikes in key states.

United Spirits reported 15.19 percent rise in consolidated net profit at Rs 232 crore in Q3FY20 as compared to Rs 201.4 crore in Q3FY19.

Total revenue from operations was marginally up at Rs 7,812.3 crore during the quarter under review as against Rs 7,777.1 crore in the corresponding quarter last year.

Sales volumes grew 3 percent, exhibiting an improving trend over the previous quarter, but still impacted by the broader consumption slowdown. Prestige & Above segment net sales grew 8 percent.

"During the third quarter, we continued to experience substantial inflation in our key raw material costs. While this resulted in significant compression in gross margin, we still delivered an EBITDA margin of 16.4 percent, up 207bps,” said Anand Kripalu, CEO, USL.

EBITDA was up 18 percent YoY at Rs 424 crore while EBITDA margin grew by 207 bps to 16.4 percent, primarily delivered through savings in operating costs and to a lesser extent by a lower marketing reinvestment rate.

"We are optimistic that the economy will gradually recover, and with that the business should bounce back more strongly. We remain committed to our medium-term ambition of growing the top line by double digits and to improve EBITDA margin to mid-high teens," Kripalu added.