Radico’s Q4 performance was above expectations. Volume growth of 13% despite the Covid-19-led slowdown indicated strong growth in the Jan-Feb period. Sales and Adjusted PAT growth at 15% and 20%, respectively, were 4% above our expectations. Gross margins contracted by 630bps during the quarter on high input inflation (ENA prices up 19% YoY). Management expects ENA and glass prices to remain benign, which should keep gross margin around 48-49% in FY21. Debt increased to Rs3.8bn from Rs3.2bn due to a temporary rise in receivables in few states. However, the company has managed to collect Rs1bn worth receivables, reducing its debt after March. While Q1 is likely to be weak due to the lockdown, volume recovery has been faster than expected since re-opening.
OutlookWe increase estimates marginally factoring in strong Q4. Maintain Buy, with a revised TP of Rs460 (from Rs400), based on 20x FY22 EPS.
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