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Dolat Capital Report
Radico Khaitan Ltd.'s Q1 FY24 was healthy and significantly ahead of estimates. Revenue/gross profit/Ebitda/adjusted profit after tax grew by +25.9/26.1/29.2/8.5% YoY.
Profit after tax trailed Ebitda due to higher depreciation and amortisation and interest costs. Stellar revenue growth of 40.2% YoY in key Prestige and Above segment in Indian-made foreign liquor is the key highlight.
Radico's FY23-25E is expected to be a strong earnings year (45% compound annual growth rate) driven by-
~12-14% price increase in country liquor,
price increases in IMFL,
strong premiumisation,
capacity expansion of single malt,
benefit from backward integration and,
favorable base.
Recent and upcoming new launches addressing gaps in portfolio to drive growth beyond FY25.
Valuations (60/43 times FY24/25E earnings per share) captures this optimism but as growth pans out, we expect further re-rating.
Driven by plethora of triggers, strong premiumisation and execution, we see limited merit in lower multiples for Radico versus United Spirits Ltd.
We thus increase our multiple from 40 times to 50 times. Maintain 'Buy' with revised target price of Rs 1,640 at 50 times FY25E EPS (earlier Rs 1,305 at 40 times).
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