Its aim of becoming one of the finest liquor companies with a range of brand innovations has played out well for Radico. P&A volume contribution in IMFL has increased to 41% in FY25 from 28% in FY19. As per the brokerage's estimates, brands that together contributed ~25% to its P&A portfolio in FY19 now contribute 50% as of FY25. Such an impressive growth has been supported by new launches and a scale-up in those brands.
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Motilal Oswal Report
Looking at Radico Khaitan Ltd.'s long-term operational journey and the resultant huge stock re-rating, it certainly is a story well cooked at this price. Radico's valuation gap with United Spirits has also significantly narrowed. The market has rewarded Radico well for its Prestige & Above success despite a consistent margin contraction, which was driven by external factors.
Over FY25-28E, we expect Radico to deliver a 16% revenue CAGR, fueled by strong growth in the P&A segment. Overall volume growth is projected at 9%, driven by a robust 15% CAGR in the P&A portfolio.
Additionally, the Ebitda margin is expected to improve from 13.9% in FY25 to 16.2% in FY28E (similar to FY19) supported by premiumization. We model an Ebitda and APAT CAGR of 22% and 30% over FY25-28E, respectively.
Radico is currently trading at 67x/53x FY26E/FY27E P/E with a RoE/RoIC of ~17%/19% in FY27E. We believe a ~30% EPS CAGR is good enough for sustaining rich valuations. We value the company at 60x P/E on Jun'27E EPS to derive a target price of Rs 3,000.
Key downside risks:
any steep inflation in ENA and glass prices;
increase in excise duty as the financial health of many states is under pressure owing to freebies, etc.; and
increase in competitive intensity.
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