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Imperial Blue Integration on Track; Revenue Growth in Line

TLNGR’s Q2FY27 performance was broadly in line with our estimate, with volumes at 8.9 Mn cases, including 5.5 Mn cases from Imperial Blue (IB). IB continued to gain traction, with 8.5% QoQ growth in secondary volumes and 100 bps+ market share gains across 17 states. Net revenue stood at INR 10,353 Mn, while NSR grew 3.2% YoY. EBITDA came in lower than our estimate of INR 1,480 Mn, with margin at 14.3%, reflecting inflationary pressure on packaging and ENA cost. Excluding subsidy income (INR 19 Mn in Q2FY27 vs. INR 204 Mn in Q1FY27), EBITDA margin moderated only marginally from 14.5% to 14.1%. Transition of all but one state has been completed; the last state is expected to be transitioned by the end of the fiscal year. Further, expected pricing revision will lift margin and boost cashflows.

Key Risks:

Sustained input cost inflation, delayed price hike and slowerthan-expected IB integration.

Revenue in Line with CIE Est.; Margin Growth Slow

* TLNGR’s volumes (ex-Imperial Blue) remained flat YoY at 3.4 Mn cases for Q2FY27. Imperial Blue volumes came in at 5.5 Mn cases

* TLNGR’s total volumes came in at 8.9 Mn cases (in line with CIE estimate)

* Net revenue stood at INR 10,353 Mn (in line with CIE estimate of INR 10,645 Mn); however, in this quarter, TLNGR received a subsidy of INR 19 Mn (vs. INR 204 Mn in Q1FY27)

* EBITDA came in at INR 1,480 Mn (vs. CIE estimate of INR 1,746 Mn), growing 145.8% YoY. Margin de-grew by 82 bps YoY at 14.3% majorly due to impact of inflationary pressure across packaging cost as well as ENA price

* TLNGR reported profit of INR 223 Mn. Adjusting for exceptional expenses, PAT came in at INR 332 Mn

Strategic Investments Strengthen Premium Brand Portfolio

TLNGR is expanding its premium portfolio through strategic investments, including INR 220 Mn acquisition in Black Tiger Distilleries for a 30% stake, providing entry into the tequila category through its Bodega Suprema brand. The company will also focus on scaling up its premium portfolio, including Monarch Legacy Edition Brandy and Seven Islands Pure Malt, with further launches planned FY28E onwards.

View and Valuation

We rationalise our EBITDA margin forecast for FY27E and FY28E to reflect elevated input cost inflation amid geopolitical disruptions. We now estimate Revenue / EBITDA / Adj. PAT CAGR of 34.2% / 32.3% / 35.8% over FY26E–FY29E, respectively. We continue to believe TLNGR will benefit from sector tailwinds amid the ongoing transitory phase, full effects of which will be clear over the longer term. We value the stock at TP of INR 650 (vs. INR 680 earlier) using the DCF approach, which implies a PE of 39x on FY28E fully diluted EPS of INR 16.5. Given an upside of 35.2%, we reiterate a ‘BUY’ rating

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