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Growth excitement continues; positive revision in guidance

* Radico Khaitan (RDCK) continued to deliver robust P&A volume growth and strong operating performance in 1QFY27. Revenue grew 12% YoY to INR16.8b, with P&A value growth at 36%, while the regular portfolio declined 15%. P&A sustained industry-leading performance, with volumes surging 36% YoY to 5.2m cases (est: 4.6m). The regular portfolio’s volumes declined 15% YoY to ~4.6m cases due to a high base (led by AP-route-tomarket change in the base) and the impact of policy changes in Karnataka and Maharashtra. Non-IMFL revenue declined 3% due to lower bulk alcohol sales.

* RDCK raised its FY27 P&A volume growth guidance to >25% (vs. 20% earlier), reflecting strong momentum in the premium portfolio. Management highlighted that Karnataka’s excise policy is favorable for premium brands, with RDCK’s P&A volumes growing 83% in 1QFY27 compared to 9% industry growth. In Maharashtra, MML volumes have stabilized at 0.6–0.7m cases, with the company holding a 7–8% market share through its JV, Radico NV Distilleries Maharashtra Limited (RNVDML). The company is targeting a 10-15% market share in the category over the medium term.

* GM expanded 610bp YoY to 49.1% (the highest in the last 21 quarters), driven by favorable raw material costs (+75bp), pricing (+75bp), and premiumization, partly offset by INR300m of higher packaging costs. EBITDA surged 50% YoY (est. 38%), while EBITDA margin expanded 530bp YoY to 20.7% (at an all-time high). Management upgraded its EBITDA margin guidance to 20% for FY27 (earlier 18.5%). Premiumization, operating efficiencies, and FTA are likely to support margin expansion. We model 19.9% and 20.6% EBITDA margins for FY27 and FY28.

* We continue to remain positive on RDCK, given its strong growth trajectory in the P&A segment and strategic expansion into premium and luxury portfolios. The luxury segment is witnessing strong growth, generating INR4.7b in revenue in FY26. It is expected to deliver >25% growth in FY27. With a continued focus on premiumization, operating leverage, and broadbased geographic expansion, RDCK has delivered industry-leading growth. We believe the rich valuations are well-justified by its continued strong performance. We reiterate our BUY rating with a TP of INR5,000.

Highlights from the management commentary

* Vodka's share in the Indian spirits industry increased from 4.6% in 1QFY26 to 6.0% in 1QFY27. The category expanded at over 20% CAGR during FY22-26, significantly ahead of the broader IMFL industry.

* Magic Moments recorded 3.25m cases in 1Q, delivering 43% YoY volume growth, while value growth stood at 51%. The growth was led by consumer demand, with no channel loading.

* With the Indian-UK FTA agreement, management expects retail prices to decline 7-8%, limiting the competitive impact.

* Annual maintenance capex is expected to remain at INR1.5–1.7b

Valuation and view

* We raise our EPS estimates by 11% for FY27 and 8% for FY28, backed by continued strong volume growth and a beat on margins.

* Management remains committed to steadily reducing its debt, supported by healthy free cash flow generation. Net debt has declined INR1.38b since Mar'26, with INR1.06b of debt remaining as of Jun’26. Management targets a net debtfree balance sheet by 2QFY27.

* RDCK remains focused on accelerating premium and luxury growth, while driving greater efficiency across operations with disciplined capital allocation.

* The company’s P&A sales were ~15% of UNSP’s P&A sales in FY19. This share has now increased to ~30% (as of FY26), and we expect it to further expand going forward. The valuation gap with UNSP has narrowed significantly, reflecting market recognition of RDCK’s brand strength and execution capabilities.

* RDCK is currently trading at 65x/53x FY27E/FY28E P/E, with an RoE/RoIC of 23%/26% in FY27E. We believe a ~34% EPS CAGR over FY26-28E provides adequate support for sustaining rich valuations. We value the company at 60x P/E on Mar’28E EPS to derive a TP of INR5,000.

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