"Radico Khaitan’s 2QFY15 performance was slightly below expectations – with headline numbers on volume, sales, EBITDA and PAT missing our expectations by 3-8%. Sales grew by 3% to INR3.6b (est. INR3.8b). Volumes declined 3.9% YoY to 4.63m cases due to de-focus on lower end brands. However, Premium brands grew 10.5% YoY to 1m cases and contributed 21.2% of portfolio volumes. Radico has received 7-8% price increase in Tamil Nadu w.e.f 1st Nov’14 and is expecting more price hikes in southern markets in FY15."
"Despite 7.5% YoY increase in ENA prices, gross margins expanded 200bp YoY to 54.7% due to better mix on account of deliberate destocking of lower end brands. Increase in other expenses (up 610bp YoY to 16.4%) and staff costs (up 30bp YoY to 7.1%) were partially offset by reduced ad spends (down 150bp YoY to 18.2%) resulting in EBITDA margin contraction of 290bp YoY to 13.1% (est. 14%). Thus EBITDA posted decline of 15.8% YoY to INR475m (est. INR527m)."
"Stock trades at 14.9x FY15 and 12.3x FY16 estimates. Reiterate BUY with target price of INR 115 (16x FY16 EPS). Spike in ENA prices and excise duty increase are key risks", says Motilal Oswal research report.
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