Buy Allied Blenders & Distillers Ltd for the Target Rs.590 by Choice Broking Ltd
Portfolio Transformation Unlocks Premium Growth
Low realization brands such as Officer’s Choice dominated the portfolio: bringing in fantastic volumes (OCW is world’s 5 th best selling Whisky in CY24). However, a portfolio transformation has added Premium & Luxury brands like Rock Paper Rum, Zoya Gin, Woodburns Whisky, Russian Standard Vodka. These brands offer MRPs at 2-4x of the current portfolio. ICONIQ White & Sterling Reserve successes strengthen our conviction. We believe ABDL will be able to scale up revenues from the new launches within next 2-3 years. We forecast a Revenue CAGR of ~15.5% over FY25-FY28E, with P&A Revenues leading the charge at 26.6% CAGR over the same period
Strong Distribution Network Provides A Springboard For Brand Launches
* Domestic Presence: ABDL is one of the only four companies to have a pan-India distribution network. ABDL has access to ~80k Retail touchpoints (~80% of all shops), which becomes a critical factor for availing benefits of distribution efficiency.
* Exports: With an export revenue share of 5%, and exposure to 23 countries, we believe ABDL is placed perfectly for the spurt in volumes from premium brands.
* HORECA: ABDL acquired Fullarton Distilleries (higher ontrade revenues) to aid channel expansion. A strong distribution muscle is likely to help the new brands scale faster and acquire a dominating market presence.
Vertical Integration And Other Initiatives Boost Margins
The vendor rate reset carried out post the IPO has boosted margins significantly by ~500 bps in FY25. FY25 EBITDA margins were 12.2%. The acquisition of Maharashtra distillery, malt plant activation & further upgrades to PET Bottle manufacturing will further improve margins. We expect ABDL to achieve industry parity EBITDA margins of 14.9% by FY28E.
Optionality: With the upcoming malt plant, ABDL will get access to aged homegrown malt. A good product will bring acceleration in P&A volumes and higher exports.
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