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Buy Radico Khaitan Ltd For Target Rs.616- HDFC Securities

Our Take:

Radico is well placed as an attractive value play in the overall IMFL industry in India with presence in several popular and Semi premium categories. Favorable demographics for the alcohol beverage industry in the form of median age of 26.8 years for India and growing social acceptability of alcohol beverage consumption are likely to augur well for the industry. Rapid urbanization, increased consumerism, and adoption of trendier lifestyles are driving vodka sales across smaller towns and cities (largely perceived as a cosmopolitan drink). Vodka is finding increasing acceptance among a large and growing number of young population (especially among female) in the Tier II cities and towns. Radico has a 60% share in the vodka market nationally.

Valuations & Recommendation:

We had initiated a buy on the company on September 14, 2020 (which has achieved its bull case target) and we re-iterate our buy on Radico given the well-balanced product mix and the strong performance history along with stable raw material prices, new product launches and high potential for re-rating. We recommend a buy on the dips to Rs. 543 – 550 band and add on 477-484 band. We feel the base case fair value of the stock is Rs.616 (23xFY23E EPS) and the bull case fair value is Rs.668 (25xFY23E EPS).

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