Key Highlights

    • Radico’s Q4 numbers beat street estimates and spurred the stock further as it trades at record high levels
    • The consistent outperformance vs peers and industry, premiumisation drive and the discount to USL’s shares are some of the positives

Mumbai: Radico Khaitan has rewarded its patient investors. After trading in a range for the most part of the 2-3 years prior to the pandemic, alcobev maker Radico Khaitan has seen its share price double in the last one year. The rally in recent days has been further spurred by the Q4 results. 

The street likes a couple of factors in Radico. Their consistent outperformance vs analyst expectations, peers and the industry too.

In FY21, where USL saw its revenues declining 10%, Radico’s revenues were flat. While that can be attributed to the fact that Radico’s salience to the popular segment is higher, this outperformance is also visible on the EBITDA front with USL’s EBITDA declining 34% while Radico’s growing 10%.

Even when compared to the broad IMFL industry, Radico’s IMFL volume decline was restricted to 8% vs the industry’s volume decline of 14%. This outperformance was seen in the last 2 fiscals too.

Radico has also been launching many more premium products. Last year, its premium portfolio was about 2.3% of its mix, this year it is 28.2%. The management aims to increase the P&A sales contribution to 60-65% from 50% currently.

Radico has also been on a quest to strengthen its balance sheet. Its net debt was at Rs. 570 cr as on March 2018. This has now gone down to just Rs. 198 cr. Analysts say Radico could be net debt free by FY23.

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As the premiumization trend continues and Radico’s market share improves, the street expects Radico’s share discount to USL to narrow, leading to Radico’s stock rising further.

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