Sharekhan has given Buy recommendation for Radico Khaitan with a target price of Rs. 1250 in its research report issued on Oct 06, 2021
Sharekhan’s research report on Radico Khaitan
RKL has emerged as a branded IMFL player by launching premium liquor brands; Premiumisation strategies have helped RKL become the volume growth leader with IMFL volumes outpacing industry growth in the past 3-4 years. Improving demographics, favourable state policies and rising preference for premium brands would help RKL’s IMFL sales volumes post a CAGR of ~13% over FY2021-24, outpacing the industry. OPM to improve to 19% by FY2024. RKL aims to turn net cash positive by FY2023 led by better working capital management and profitability. In absence of major capex, higher cash generated will be used for potential higher dividend payouts to shareholders.
Outlook
We initiate coverage on Radico Khaitan Limited (RKL) with a Buy and PT of Rs. 1,250; Stock trades at 30.9x/24.7x its FY2023/24E EPS, at a 50% discount to USL’s valuations. Better earnings growth, higher FCF and strong return profile will reduce valuation gap.