In the brokerages' view, Radico offers a much better risk-reward profile compared to United Spirits at similar valuations, given its much better earnings CAGR (35% FY24-27) versus United Spirits' (14% CAGR) and its ability to fully participate in the premiumization story.
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HDFC Securities Institutional Equities
United Spirits Ltd.'s Q3 FY25 results were broadly in line with our estimates; however, volume growth surprised us positively. Prestige and Above/regular segment volume grew 11%/6%, respectively, owing to a favorable base (more relatable to the regular segment), re-entry into Andhra Pradesh due to positive policy interventions, and a healthy uptick seen during the festive season.
However, Ebitda margin expansion was lower than our expectation due to higher brand investments (up 16% YoY), employee costs (up 23% YoY), and higher salience from the low-margin regular segment.
We expect double-digit revenue growth (a rarity among consumer sector names these days) to continue over FY25-27, owing to a favorable base, the foray into Andhra Pradesh, and a focus on renovations across key brands.
At the same time, in the medium term, management intends to inch towards a high-teen Ebitda margin (18.5% in FY27) from 16% in FY24.
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