BSE ID : 532497 NSE ID : RADICO
RECOMMENDED PRICE 153.55
PEAK FROM RECO 500.00 225.63%
CURRENT PRICE 289.00 88.21%
Radico Khaitan (RDCK) is a distillery and brewery company manufacturing alcohol & alcoholic products. We initiate coverage on RDCK as a BUY with a price objective of Rs 210, representing a potential upside of 33% in the next 12 months.
Radico Khaitan (RDCK) is a distillery and brewery company manufacturing alcohol & alcoholic products. It was established in 1943 as Rampur Distillery & Chemical Company. It was a bottling company for other’s spirits. Dr. Lalit Khaitan and his father acquired it in 1972 as a part of the family business. In 1996, the family business was split and Mr. Lalit Khaitan got the Rampur Distillery Company as his share of the family assets. The distillery generated revenue of Rs 70 crore per annum but was incurring losses of about Rs 10 crore a year. The liabilities of Rs 40 crore were also to be taken over.
Radico Khaitan (RDCK) has transformed itself from a major spirits supplier to a large branded products company in the IMFL (Indian Made Foreign Liquor) space from 1998. IMFL accounted for 65% of its revenues in FY17. Its brands, 8PM whisky, Magic Moments vodka, Contessa rum and Old Admiral brandy, are among the top selling brands in their category. Premium brands accounted for 44% of its IMFL sales in FY17 and it launched six brands in the last five years in premium categories. Its strong distribution network of 55,000 retailers, across India, accounts for 90% of its revenues.
Over the period FY17-20E, we expect CAGR growth in revenues of 6.6%, EBITDA to grow by 12% and PAT by 22.6%. Return ratios - ROE and ROCE - too are expected to grow by 305 bps to 10.9% and by 386 bps to 19.5%, respectively. The key reason for margin expansion is the increased focus on premium brands.
We initiate coverage on RDCK as a BUY with a price objective of Rs 210, representing a potential upside of 33% in the next 12 months. We arrived at the price target by applying 22 times PE multiple to earnings for the 12 months period to June19.
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