Radico Khaitan Ltd. share price target

During FY17-19, Radico enjoyed an earnings upcycle which is expected to moderate in FY20. However, co is investing in new launches, driving premiumisation and deleveraging B/S which keeps the story alive. Robust cash flow generation over the last 2 years (Rs 4.4bn cumulative FCF) was redeployed to repay debt (Rs 3bn in Jun-19 vs. 7.9bn in Mar-17). We expect deleveraging to sustain, making the co debt free by FY22. We expect the stock to re-rate as premiumisation and deleveraging continues. Radico Khaitans 1Q performance was mixed with beat in volume growth but in-line EBITDA. Hardening of RM cost led to crack in GM margins. Consistent market share gains and scaling new launches drives our revenue upgrade by 6% over FY19-21E. However, sustained RM pressure leads to only 1% EBITDA upgrade over FY19-21E. We value Radico at 26x (35% discount to UNSP) on Mar-21 EPS, arriving at a TP of Rs 492. Maintain BUY.

We believe that the broader mid-cap sell-off, concerns about rising raw material costs and fears about liquor ban in Andhra have overshadowed positive developments such as market share gains backed by product launches and continued debt reduction. RDCK is protected from the recent jump in Extra Neutral Alcohol (ENA) prices as it is backward-integrated with 100mn liters of ENA capacity. The recent price hikes by 10 states...

of our estimates, driven by 6.2% yoy growth in IMFL volume which was at 5.1 mn cases. Volume in Prestige and above category grew at 22.1% yoy while Regular category grew at a slower pace of 1.3% yoy. Volume growth in...

Reiterate BUY with revised TP of Rs 592 (32x Dec-20E EPS) vs. 40x for UNSP.RDCK trades at relatively cheap valuation at 25/22x FY20/21E EPS vs. 47/37x for UNSP. Radico Khaitan (RDCK) delivered healthy performance in 3QFY19. Revenue/EBITDA/PAT grew by 14.6/27/51% YoY. For 9MFY19, revenue/EBITDA/PAT grew at 18/37/69%.

Volume growth of the premium category continues to be robust: up 19% yoy/7% qoq. The company further reduced debt by Rs768mn in Q3. We expect RDCK to become debt-free in FY20 due to its solid FCF generation. The stock is available at a PER of 23.8x/20.1x FY21/21E EPS which is cheap for a consumer name. Our Buy recommendation is underpinned by an FCF yield of 5%,...

next six months. The company expects molasses prices to be in line with last year. RDCK will incur Rs700mn in capex in the next two years to support premium brands' growth. The company is in the process of: 1) converting one of its molasses distilling plants to a grain spirit-based one; and, 2) tripling its malt spirit capacity to 1.5mn liters. The production of new products Verve Vodka, 8PM Black Whiskey, and Morpheus Blue Brandy is in full swing. Management expects three product launches in the next two years. Our forecasts and TP are unchanged, based on a target 31x FY20E PER, reflecting strong earnings growth. Strong 3Q results with expected 46% yoy growth in earnings should be...

with our estimates, driven by 11.5% yoy growth in IMFL volume which was at 5.2 mn cases. Volume in Prestige and above segment grew at 14.6% yoy while Regular segment grew at 10.3% yoy. Volume growth slowed on qoq due to...

Reiterate BUY with revised TP of Rs 548 Radico Khaitan (RDCK) reported healthy numbers for fourth consecutive quarter. In 2QFY19, revenues/ EBITDA/PAT grew by 15.5/39.5/76.3% YoY. Even in trailing 12m, RDCKs revenue/EBITDA and PAT grew at an accelerated pace of 20/44/85%. We expect the growth rate to taper from 3QFY19 as the base effect kicks-in yet it should remain healthy.

Radico Khaitan Ltd (RDCK) is the third largest volume player in IMFL segment in Indian market with annual sales of more than 20 million cases. Having entered in branded IMFL segment in late 90s, RDCK has established a wide range of products across different price levels and expanded its presence in the market. RDCK owns six pillar brands, named 8PM, Magic Moments, Old Admiral, Morpheus, Contessa and After Dark, which have significant market presence and enjoys considerable market share in the industry. RDCK has three distilleries in Rampur, UP and holds 36% interest in a JV in Aurangabad, Maharashtra. It owns 5 bottling units and...

EBITDA margins in the quarter improved by 259 bps yoy to 17.7% led by premiumization, better realization due to price hike in certain states on yoy and lower raw material cost. The company expects improvement in EBITDA...