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Dolat Capital Report
Radico Khaitan Ltd.'s Q4 FY24 result was a tad soft vs. expectations (yet healthy) driven by payment challenges in a state and annual policy related hiccups. On soft base, revenue/gross profit/Ebitda/adjusted profit after tax grew by +30/31/51/52% YoY and FY24 ended on a healthy note with +31/33/41/25% YoY growth.
FY24-26E earnings are expected to be strong (~41% CAGR) driven by-
healthy growth in P&A,
growth in Popular on favourable base,
fullyear benefit from backward integration (versus H2 in FY24),
softening of raw material and
financial leverage playing out.
The anticipated raw material softening in FY25/26 could result in significant earning delta but is not fully factored. Growth slowdown in P&A is a key risk to earnings and thus the PE multiple.
We increase our FY25/26E EPS by 17/8% to factor softer raw material. Valuations at 56/45 times FY25/26E EPS partly capture business optimism but as growth pans out, we expect earnings, roll-forward and re-rating led price uptick to continue.
Radico Khaitan has seen time correction since the last results. In backdrop of impending triggers, we upgrade to ‘Accumulate' from Reduce with revised target price of Rs 1,920 at 50 times FY26E earnings per share (earlier Rs 1,780 at 50 times FY26E EPS).
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