Radico Khaitan Rated New 'Buy' At CLSA — 16% Upside Seen

CLSA has initiated coverage on Radico Khaitan, one of India’s leading spirits manufacturers, with an ‘Outperform’ rating and a target price of Rs 3,098, implying a potential upside of 16% from current levels. The firm sees Radico as a robust long-term premiumisation play in India’s evolving alcoholic beverages market.

“Radico Khaitan is the leading manufacturer of white spirits (vodka, gin etc) in India and is building a portfolio of premium and luxury brands across the spirits categories,” CLSA said in its initiation note.

The brokerage highlighted Radico’s strong brand-building capabilities, particularly in the premium segment, while acknowledging that profit delivery has been mixed in the past.

“Radico has a demonstrated track record in brand creation and premiumisation; however, profit delivery has been mixed thus far,” CLSA noted.

CLSA expects the prestige and above (P&A) spirits category to grow from $3.3 billion in FY25 to $4.4 billion by FY28 for the top six Indian players, driven by rising incomes, improved availability, and better quality products.

“Radico is the leader in premium white spirits in India with Magic Moments Vodka and its premium variants,” the note said.

The firm pointed out that Radico’s premium volumes grew at a 12.4% CAGR from FY15 to FY25, significantly outpacing its overall volume CAGR of 4.9%. CLSA forecasts the premium volume share to rise from 41.4% in FY25 to 43.6% by FY28.

CLSA projects a 265 basis point expansion in EBITDA margins over FY25–28, reaching 16.5%, driven by a better product mix and operating leverage.

“Radico’s Ebitda margin improvement should largely be driven by mix-driven ASP increases, leading to higher gross margin and fixed costs growing slower than gross profit,” CLSA explained.

The brokerage also noted that while Radico’s margins peaked at 17% in FY21, they stood at 13.9% in FY25, up from 11.4% in FY15.

While acknowledging regulatory risks in the sector, CLSA believes Radico is relatively insulated due to its geographic footprint.

“The Maharashtra government recently announced a sharp increase in IMFL taxes… However, Radico has less of a presence in states impacted by these changes than its peers,” the note stated.