Accumulate Radico Khaitan; target of Rs 320: Kotak Securities

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26 Aug, 2025 12:21

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Radico Khaitan Ltd (RKL) is expected to be a major beneficiary of decline in molasses prices. Molasses comprises of over 20% of its raw material cost and ~8% of its net sales. As per news reports, molasses prices have declined by upto 90% in the past 3-4 months. As per management, the prices may remain lower than its historical average in coming quarters. We have assumed 150-200 bps improvement in EBITDA margins assuming average prices to be at 25-35% lower i.e. ~Rs 250-300 per quintal for next 1-2 years Vs current ~Rs 40 per quintal. Further, price hike received in southern states like Kerala, Telangana, etc will also strengthen its margins. RKL has witnessed improvement in volume trends with Prestige segment volume growth of 6.5% yoy and regular segment volume growth of 3.5% yoy in Q2FY18. The volume growth is expected to revive in coming quarters, as the impact of highway liquor sale ban started normalizing post Supreme Court's clarification. The company aims for lower single digit growth in regular segment and high single digit growth (8-10%) in prestige and above segment in the longer run. We have upgraded our earning's estimates for FY18E and FY19E by 3.5% and 18.8% respectively factoring in lower raw material prices and introduced FY20 estimates. We maintain Accumulate rating on the stock with revised target price of Rs 320 (Vs Rs 236 earlier), as we roll forward our valuation multiple to FY20E.

We maintain Accumulate rating on the stock with revised target price of Rs 320 (Vs Rs 236) as we roll forward our valuation multiple to FY20E and values the stock at 23x FY20E EPS.

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