Add Radico Khaitani Ltd For Target Rs.4,820 by Choice Institutional Equities Ltd
Premium Shift & Market Dominance Fuel Strong Margin Expansion
RDCK’s premiumisation momentum led to a growth of 35.9% YoY in P&A volume (highlighted by +83% growth in Karnataka post-price rationalisation) and a +531 bps expansion in EBITDA margin. This expansion was driven by a favourable product mix, price hikes and benign input cost. However, route-to-market shifts and policy changes in Maharashtra and Karnataka offset the growth. Meanwhile, RDCK’s market leadership remained robust with Magic Moments holding more than 60% share in the vodka market and Jaisalmer commanding ~50% share of India’s luxury craft gin market. The leadership was further supplemented by early traction for Morpheus Whiskey across 10– 12 states and continued momentum in the core Indi-lux portfolio.
View and Valuation
RDCK has delivered another quarter of shining performance with a massive beat of 322 bps, posting an industry-leading EBITDA margin of 20.7%. Karnataka as well as TN privatisation and UK FTA are likely to provide further tailwinds to RDCK’s fundamental performance. We revise our estimate upwards for FY27E and FY28E by ~5% and 8.3%, respectively. We, therefore, raise our DCF-derived target price to INR 4,820, implying a PE of ~63x on FY28E EPS of INR 77.0. Given the limited upside of 10% in the valuation, we assign ‘ADD’ rating.
Favourable Mix and COGS Efficiency Drive Margin Expansion
* P&A volumes grew 35.9% YoY, offsetting a 14.9% YoY decline in Popular volumes, resulting in 3% overall volume growth.
* Net revenue came in at INR 16.8 Bn, growing by 11.8% YoY (in line with CIE est.). IMFL revenue grew by 18.0% YoY led by the premium portfolio and mix improvement.
* EBITDA margin came in at 20.7% (beating CIE est. by 322 bps), improving by 531 bps; EBITDA stood at INR 3.5 Bn
* PAT improved by 75.9% to INR 2.3 Bn (+16.5% over CIE est.), leading to a PAT margin of 13.6%
Portfolio Broadens in Price Tiers, De-risking Vodka Dependence
Brand-level growth broadened well beyond the vodka franchise. 8PM Premium Black gained further share in key markets led by IPL tie-up, while the relaunched After Dark Blue, with contemporary packaging, is targeting the aspirational whisky segment. Within Indi-lux portfolio, Rampur Single Malt and Sangam World Malt continued building out alongside Jaisalmer Gin's category lead and Royal Ranthambore’s “Six Tigers" storytelling campaign added brand equity beyond pure volume push. This spread across mainstream, semi-luxury and luxury whisky alongside gin and vodka reduces RDCK's reliance on any single brand to sustain premiumisation.
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