Radico Khaitan Q1 Results Review - Inline, Healthy; Gross Margin Expansion Key Trigger: Dolat Capital

Dolat Capital Report

Radico Khaitan Ltd.’s Q1 FY25 result was in line and healthy. revenue /gross profit/Ebitda/adjusted profit after tax grew by +19/13.5/ 24.6/20.6% YoY.

The company is expected to grow strongly over FY24-26E with a CAGR of ~33% driven by-

1. healthy growth in Prestige & Above, especially in Luxury segment,

2. revival of its Popular brand on favourable base,

3. full-year benefit from backward integration (versus H2 in FY24),

4. softening of raw material and

5. financial leverage playing out.

The anticipated raw material softening in FY25/26E could result in a significant earnings delta. However, a potential slowdown in P&A growth is a key risk to earnings which may impact the PE multiple.

We reduce our FY25-27E EPS estimates by 11/7/4% to factor in lower gross margin due to persistent raw material inflation. Valuations at 62/47/38 times FY25/26/27E EPS partly capture business optimism, but as growth pans out, we expect earnings to roll forward and stock to re-rate leading to a further price uptick.

Radico Khaitan has seen six months of time correction. Gross margin expansion and deleveraging are key triggers. Reiterate ‘Buy’ rating with revised target price of Rs 2,020 at 50 times H1 FY27E EPS (versus Rs 2,150).

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