Radico Khaitan - Inline, Healthy, Strong Premiumisation At Play: Dolat Capital

Dolat Capital Report

Radico Khaitan Ltd.’s Q2 FY24 was healthy. Revenue/gross profit/Ebitda/adjusted profit after tax grew by +21.5/29.1/34.6/19.4% YoY.

These was led by robust revenue growth in Prestige and Above at +35.6% YoY, non-Indian made foreign liquor +49.1% but off-set partly by decline in Popular of 16.5%. Protit after tax trailed Ebitda due to higher depreciation and amortisation and interest costs.

Radico Khaitan's FY23-26E is expected to be a strong earnings year (~34% compound annual growth rate) driven by-

1. strong growth in P&A in FY24-26,

2. volume recovery in Popular in FY25-26,

3. stabilisation of raw material/softening in FY25-26,

4. ~12-14% price increase coupled with robust volume growth in CL in FY24,

5. benefit from backward integration and

6. as financial leverage plays out.

Valuations (63/44/35 times FY24/25/26E earnings per share) captures this optimism but as growth pans out, we expect further re-rating. Driven by plethora of triggers,strong premiumization and execution, reiterate 'Buy' with target price of Rs 1,850 at 50 times FY26E EPS (earlier Rs 1,640 at 50 times FY25E EPS).

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