Initiating Coverage: Radico Khaitan Ltd - BUY - TP Rs.200 - Kotak

Radico Khaitan Ltd (RKL) has established strong foothold in the Indian Made Foreign Liquor (IMFL) industry through its largest selling brands such as 8PM whisky, Magic Moments vodka, Old Admiral brandy, Contessa rum, etc. RKL has evolved from a distillery player to a branded IMFL player in India with presence across products categories. The company is increasing its focus on premiumization with its volume share of prestige and above segment in IMFL business increased from 10% in FY10 to 26% in FY17. The company is on track to grow this further which will have positive impact on its EBITDA margins in coming years. The company is focused growing organically by leveraging its marketing and distribution strength without any major capex The improvement in margins, rationalization in sales mix and surplus capacity for growth would positively impact its future cash flows and would help it in achieving its long term vision of zero long-term debt. We believe that most of the negatives in the industry such as highway ban, prohibition, GST, etc are already factored in and expect growth to come back in FY19E. The stock is available at a discount to its peer. We recommend BUY on the stock with target price of Rs. 200.

Source : Equity Bulls

Keywords