Radico Khaitan Q3 Results Review - Stellar Operating Performance, Raw Material A Headwind: Dolat Capital

Dolat Capital Report

Radico Khaitan Ltd.’s Q3 FY24 was healthy. Revenue/gross profit/Ebitda/adjusted profit after tax grew by +47/48/28/30% YoY. These was led by robust revenue growth in Prestige & Above at +29% YoY, non-Indian-made foreign liquor +174% but off-set partly by decline in Popular of - 11%. PAT trailed Ebitda due to higher D&A and interest costs.

Radico’s FY23-26E is expected to be a strong earnings year (~32% compound annual growth rate) driven by-

1. strong growth in P&A,

2. volume recovery in Popular in FY25- 26,

3. ~15-20% price increase coupled with robust volume growth in CL in FY24,

4. benefit from backward integration and

5. as financial leverage plays out.

Softening of raw material in FY25/26 could lead to major earnings delta and is not factored currently. Growth slowdown in P&A is key risk. 

Valuations at 85/68/50 times FY24/25/26E earnings per share captures the business optimism but as growth pans out, we expect earnings and roll-forward led price uptick to continue.

Stock has moved up by 35% since last results. Reiterate Reduce with revised target price of Rs 1,780 at 50 times FY26E EPS (versus Rs 1,700 at 50 times FY26 EPS).

We remain positive on business but for valuations.

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