Reduce Radico Khaitan; target of Rs 900 : HDFC Securities

HDFC Securities recommended reduce rating on Radico Khaitan with a target price of Rs 900 in its research report dated August 04, 2023.

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August 08, 2023 / 11:50 IST

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HDFC Securities' research report on Radico Khaitan

Radico’s Q1FY24 print saw a beat with revenue/EBITDA/PAT growing by 24/29/9%, led by resilient P&A momentum. Net sales grew by 26% YoY, with IMFL volumes up 8% YoY to 7.37mn cases. P&A volume/revenue grew by 27/40% (HSIE 15/19%). P&A is sustaining a 9-10% four-year volume CAGR. Regular portfolio volume/revenue fell by 7/5% (HSIE -10/-12%). GM expanded by 300bps QoQ (flat YoY) to 43.6%, well supported by a price hike in country liquor/IMFL and increasing P&A mix, while EBITDAM expanded by 30/300bps YoY/QoQ to 12.6% (HSIE 11%). Radico continues to remain upbeat about exiting FY24 with mid-teen EBITDAM, led by (1) mid-teen P&A volume growth; (2) mid-single digit regular volume growth; (3) price hikes in both country liquor and IMFL; (4) softening RM (glass and ENA expected to remain volatile); and (5) efficiency gains from in-house capacities. Whilst we remain positive about Radico’s success in product innovation and luxury portfolio scale-up, we expect costs related to capex to impact earnings.

Outlook

We maintain our EPS estimates and value Radico at 30x P/E on Jun-25 EPS to arrive at a TP of INR 900. Maintain REDUCE.

For all recommendations report, click here