Radico Khaitan Ltd. share price target

IMFL segment comprises ~80% of consolidated revenues. The rest is contributed by IMIL and bulk alcohol P&A; volumes contribute 30% to the overall IMFL volumes (rest by popular)...

RKL has been continuously reducing its overall net-debt from peak of ~| 950 crore to current ~| 198 crore and generated ~| 380 crore of CFO in FY21. The management also intends to outsource its bottling of popular segment volumes, which would lower its incremental investment into increasing capacity, thus improving its return ratios. Radico continues to widen its volume growth performance over other industry players while its increased brand presence in higher categories is helping it to instil longevity into Radico's premiumisation journey. We maintain our BUY rating on the stock...

Radico continues to widen its volume growth performance over other industry players. It is on the cusp of another breakthrough (post dominance of domestic vodka market volumes) with its focus on the bigger domestic P&A; whisky segment by launching more brands in the segment. Exports market (8% of revenues) and CSD (8-9% of revenue), present other opportunities to grow its premium products. The company is also expected to become debt free in a year or two. We maintain our BUY rating on the...

Newer launches to help company tap premium segments Premium variants of successful brands such as 8PM whisky (8PM platinum), Morpheus brandy (Morpheus Blue), Magic Moments (better canister packaging, Magic Moments Verve) has helped the company to explore newer segments (Prestige and Above whisky) and also tap different consumer palates. Radico is planning to launch more premium products in the whiskey segment. Launches in super-premium segments (Jaisalmer Indian Craft gin, Rampur Indian Single Malt) are expected to help the...

Upping the competitive ante; Growth + PE re-rating story Radico Khaitan (RDCK) AR highlight that it registered a healthy 12.5% volume growth in FY20 against industry growth of meager 0.5%. Premiumisation remains the key focus area and a growth driver. 11 out of 12 brands launched in last decade were in premium category. RDCK's brand portfolio is entirely organically developed. RDCK has four millionaire brands and two more in the pipe. RDCK was ranked as the no. 1 mid-cap company in Fortune India's The Next 500 viz. the most...

The company is seeing a good recovery as June sales were only down ~10% YoY and the company expects to reach normal revenue trajectory in H2FY21. On profitability front, gross margin expanded owing to combination of factors like better price realisation and favourable state and product mix and price increase in key southern state of Telangana. Benign input cost and higher product realisation are expected to aid in gross margin improvement and stringent cost control and judicious spend on sales promotion will...

backdrop of Covid. Key highlights were (1) A modest volume de-growth of 10% YoY in Jun (2) 1/3rd debt reduction from Rs 3.8bn in Mar'20 to Rs 2.6bn as of Jun and (3) 740/240bps gross/EBITDA margin expansion. Over the last three years, RDCK experienced robust volume growth, price increases, premiumisation, RM tailwinds, and thus de-leveraging. RDCK's revenue/EBITDA/PAT grew at an impressive CAGR of 13/21/41% over FY17-20. Net debt declined from Rs 9.5bn in FY16, to Rs 2.6bn as of Jun-20. We remain constructive on RDCK story due to...

Strong volume growth continues for IMFL category Despite the lockdown in the latter part of March, RKL was able to deliver double digit volume growth in Indian made foreign liquor (IMFL). For FY20, IMFL volume growth was ~12.5% whereas prestige and above segment grew 15.2% YoY to 7.05 million cases while regular and other segment volumes grew 11.4%. Volume growth was broad based across key states and key IMFL brands. RKL's new brands 8PM Black Whiskey and 1965 Spirit of Victory rum continued their strong growth trajectory. Revenue for FY20...

During FY17-19, Radico enjoyed an earnings upcycle which has moderated in 9MFY20. However, co's focus on investing in new launches, driving premiumisation and deleveraging B/S has kept the growth momentum steady. Robust cash flow generation over the last 2 years (Rs 5bn cumulative FCF) was redeployed to repay debt (Rs 3.6bn in Dec-19 as compared to Rs 7.9bn in Mar-17). We expect deleveraging to sustain, making the co debt free by FY22. Healthy cash flow and deleveraging will re-rate the stock. Radico Khaitan saw a blockbuster performance in 3Q with P&A; saw 21% volume growth (beating estimates). Liquor industry facing multiple headwinds (slowdown, flooding, liquidity stress and policy changes) in 9MFY20, despite, Radico posted 16% P&A; volume growth to 5.5mn cases. Ease in RM inflation and sustaining healthy volume should re-rate the stock. We value Radico at 22x (45% discount to UNSP) on Dec-21 EPS, arriving at a TP of Rs 527. Maintain BUY.