Radico Khaitan share price has gone up 23% in the last one year; why it is a top stock Stability in raw material prices, strong product portfolio and industry tailwinds to drive performance
The manufacturer and trader of alcoholic products reported a strong performance in the June quarter despite a challenging operating environment. Its revenue and PAT surpassed Reuters-Refinitiv estimates by 1.2% and 13%, respectively. Despite low consumption growth and volatile commodity prices, top line and bottom line registered a double-digit growth on a year-on-year basis.#sr_widget.onDemand p, #stock_pro.onDemand p{font-size: 14px;line-height: 1.28;} .onDemand .live_stock{left:17px;padding:1px 3px 1px 5px;font-size:12px;font-weight:600;line-height:18px;top:9px} #sr_widget.onDemand .sr_desc{margin:0 auto 0;} #sr_widget.onDemand .sr_desc{color: #024d99;margin-top:10px;} #sr_widget.onDemand .crypto .live_stock .lb-icon{8px 6px 5px 3px !important} #sr_widget.crypto.onDemand a.text{border-bottom:1px solid #ccc;padding-bottom:5px;display:block;width:100%} #sr_widget.onDemand .sr_desc .text p, #stock_pro.onDemand .sr_desc .text p{font-size:12px;font-weight:400;} The performance was driven by a robust volume growth in the P&A (Prestige and Above) segment and ramp-up in the non-IMFL (Indian Made Foreign Liquor) revenue aided by the start of the Sitapur plant. The company has an annual distillation capacity of 321 million litre and offers over 25 brands. It has over 1 lakh retail outlets in India and exports to over 100 countries. Moreover, it is a leading supplier of branded IMFL to the Canteen Stores Department (CSD), a segment with high entry barriers due to strict brand requirements.
The company is benefitting from the improving growth prospects of the spirits industry, driven by positive demographics, rising urbanisation, premiumisation, emerging spirits categories other than whisky, social acceptance and an aspirational consumer base. The evolving retail landscape through modern stores and digital integration is also making it easier to buy alcohol. The company’s 2023-24 annual report cites Euromonitor International estimates, which predict IMFL sales volume to grow at a CAGR of 5.6% between 2024 and 2028.
While the raw material price inflation is creating challenges, mix improvement and price hikes have partially helped offset the effect. A good monsoon is also expected to moderate grain prices in the coming months. This, coupled with declining glass bottle prices, improving crop yields and backward integration benefits (through Rampur and Sitapur units), are expected to support margins in the future. The management has guided 16-17% EBITDA margins in 2025-26.
The company has taken strategic steps to sustain growth momentum. Prudent marketing investments over existing core brands, successful product launches in the luxury space (Indian single malt and Indian craft gin), extensive distribution network, efficient supply chain management, technology-driven R&D, and emphasis on innovation and customercentricity are some such initiatives.
It is also aiming to strengthen its brand portfolio through targeted marketing and introduction of select new brands in the luxury and premium space. In the export market, the management is focussing on expanding its luxury portfolio in travel retail and on-trade placements.
The current net debt of Rs.700 crore is manageable. The management aims to be debt-free by 2025-26 through effective management of working capital. Moreover, its major capital expenditure is over, which will also support debt reduction. The stock has outperformed the market benchmark in the past year, with 23.3% returns, compared to the BSE Sensex’s 20.9% returns.
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This story originally appeared on: India Times - Author:Faqs of Insurances
