Published on 6/06/2022 2:41:24 PM | Source: ICICI Direct
Follow us Now on Telegram ! Get daily 10 - 12 important updates on Business, Finance and Investment. Join our Telegram Channel https://t.me/InvestmentGuruIndiacom
Download Telegram App before Joining the Channel
New launches, back-end integration to revive margins
About the stock: Radico Khaitan (earlier Rampur Distillery Company) is among the largest manufacturers of Indian made foreign liquor (IMFL) in India. The company is also a supplier of Indian made Indian liquor (IMIL) and bulk alcohol in India.
* IMFL segment comprises ~80% of consolidated revenues. The rest is contributed by IMIL and bulk alcohol
* P&A volumes contribute 30% to overall IMFL volumes (rest by popular)
Q4FY22 Results: Margins were impacted due to a sharp rise in input costs.
* Net revenues grew 18% YoY to | 813 crore, IMFL volume grew 16% YoY
* EBITDA de-grew 21% to | 80 crore with margins at 9.8% (vs. 14.7% in Q4FY21)
* Subsequently, PAT de-grew 32% to | 50 crore
What should investors do? In spite of the current inflationary environment being faced by the liquor sector, Radico has been steadily building up its premium portfolio (31% of volumes). Also, with its vertically integrated model and price hikes in a few states, it remains resilient in the medium to long term.
* We remain positive on the stock and maintain our BUY recommendation
Target Price & Valuation: We value the stock at | 960 i.e. 33x P/E on FY23E EPS
Key triggers for future price performance: Newer capacities would ensure enough availability of grain based ENA to address Radico’s higher growth expectations (expect margins to remain at elevated levels).
* Pan-India launch of new super premium spirits and gaining favourable foothold in the fast growing segment
* Continued launches in premium whisky space
* Nearing net-debt free status with return ratios reaching 20%+ levels
Alternate Stock Idea: Besides Radico Khaitan, we remain positive on United Spirits.
* United Spirits (USL) is India’s leading alcoholic beverage company and subsidiary of global leader Diageo plc. It manufactures, sells premium liquor brands such as Johnnie Walker, Black Dog, Black & White, Vat 69, Antiquity, Signature, Royal Challenge, McDowell’s No 1, Smirnoff and Captain Morgan
* We have a BUY rating on the stock, with a target price of | 960
To Read Complete Report & Disclaimer Click Here
https://secure.icicidirect.com/Content/StaticData/Disclaimer.html
Above views are of the author and not of the website kindly read disclaimer
Bajaj Allianz Life Insurance launches Sustainable Equity Fund
Vedanta appoints chip industry veteran David Reed as CEO of new biz
Growth for Indian IT services industry likely to slow down: ICRA
Market Quote : RBI`s policy announcement on Wednesday will provide more colour on its future rate actions Says Vinod Nair, Geojit Financial Services