Buy Allied Blenders and Distillers Ltd For Target Rs. 750 by Choice Institutional Equities Ltd
Premiumisation On-track; Conflict Drags Margin Temporarily
Q1FY27 reinforced ABD's premiumisation-led strategy, with the Prestige & Above (P&A) segment growing 16.1% in value terms, driven primarily by volume (+12.8% YoY) as against realisation growth (4.9% YoY). Benign input cost and early backward integration gains supported gross margin expansion. However, West Asia conflict-led supply shock in PET resin, glass and increased brand investment impacted EBITDA margin by INR 240 Mn (20% of reported EBITDA). The upcoming UK FTA benefit and progressive commissioning of backward integration assets are expected to expand EBITDA margin by 241 bps by FY28E and a further 80 bps by FY29E.
View and Valuation
We maintain our FY27E margin and now project FY28E margin to expand by 60 bps supported by an expected price revision and activation of backward integration projects (bottling, malt plants and ENA distilleries). This has led to an upward revision in FY28E PAT by 2.1%. We anticipate volumes and realisation to expand at a CAGR of 11.4% and 5.7%, respectively, over FY26–FY29E. Our revised estimate leads to Revenue / EBITDA / PAT CAGR of 17.0% / 26.8% / 42.1% over the same period. We, thus, maintain our ‘BUY’ rating on the stock and upgrade our TP to INR 750 (vs. 690) using the DCF approach, implying an FY28E PE of 44.5x.
Margin Strength Masked by One-off Disruption
* P&A volume grew by 12.8% to 4.4 Mn cases; P&A revenue salience improved to ~59.3% versus 55.8% in Q1FY26.
* Popular volume grew by 2.2% to 4.7 Mn cases, while revenue growth from this segment remained flat at 0.5% YoY
* Net revenue grew by 6.1% YoY to INR 9.8 Bn (CIE est. of INR 10.2 Bn), with an overall volume growth of 5.9% YoY and a 9.1% increase in realisation
* Excluding the INR-240 Mn impact of global supply chain disruption, like-tolike (LTL) EBITDA would have been INR 1.4 Bn (+25% YoY), with LTL EBITDA margin at 14.2% (+216 bps YoY)
* The LTL PAT, excluding impact of global supply chain disruptions would have been INR 694 Mn (+24.3% YoY), with LTL Net Profit margin at 7.1% (+104 bps YoY)
ICONiQ White Scale-up and Portfolio Renewal to Drive Growth
The brand remained a core growth driver (+33.8% YoY to 3.1 Mn cases), further cementing its scale and international reach. Beyond the hero brand, ABD is broadening its base adding Zoya Pink to the Maestro luxury stable, strengthening premium distribution and refreshing legacy brands (Officer's Choice Blue and Sterling Reserve B7). H2FY27E launches in vodka and premium whiskey are expected to target the fast-growing White Spirit segment. We believe this broader portfolio push will power a P&A volume CAGR of ~20% over FY26–FY29E
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