Target: ₹2,996
CMP: ₹2,590.75
We re-iterate a Buy on Radico Khaitan (RKL) with a revised PT of ₹2,996. Stock trades at 64x/51x its FY26E/FY27E earnings, respectively. P&A category to post over 15 p[er cent volume growth in FY25 driven by focus on premiumisation, while regular category is expected to deliver mid-single-digit volume growth.
Targets late-teens OPM in three years. With strategies in place, we expect RKL’s revenues and PAT to post an 18 per cent and 39 per cent CAGR, respectively, over FY24-27. Strong earnings growth and reduction in debt will boost return profile in the coming years.
Focus on premiumisation and support of backward integration will drive consistent strong double-digit earnings growth in the coming years. We like the company’s focus on launching products in brown and white spirits, targeting the premium/luxury segment to consistently gain market share in key markets and outpace the industry.
Margins have bottomed out and we should expect consistent improvement in profitability and cash flows in the coming years. Stock trades at 64x/51x its FY26E/FY27E earnings, respectively.
Key Risks: Slow expansion in OPM due to a change in liquor policies in key states, any increase in excise rate on liquor or volatility in the raw material prices would act as a key risk to our earnings estimates in the near to medium term
