Bullish broker calls lift Radico Khaitan to record high; stock zooms 16 percent

The stock could rally further up to Rs 1,343, which means a 13 percent upside from today’s all-time high, in two weeks, said KKunal Parar, Vice President-Research, Choice Broking.

Goldman Sachs has maintained a ‘buy’ rating on the stock with the company launching Magic Moments Dazzle Vodka and Royal Ranthambore Whisky. The brokerage believes both products will potentially fill up a couple of the product gaps.

Wide product launches across key markets over the next quarter, is seen having a significant impact beginning 4Q FY22, according to Goldman Sachs.

“We believe these new launches will position RADC well to win a share in markets such as Karnataka, Maharashtra, Delhi and Haryana where RADC is not a market leader,” the brokerage said.

The foreign brokerage also believes that these new launches make Radico Khaitan well-placed to capitalise on increased spending as retail and food services reopen following the COVID-19 lockdowns.

Further, a couple of other brokerage firms had also initiated coverage on the stock lately on expectations that Radico Khaitan is in a sweet spot to capitalise on the growing needs and premiumisation trend in the alcohol industry.

Last week, Sharekhan by BNP Paribas, initiated coverage on Radico Khaitan with a ‘buy’ rating and target price of Rs 1,250.

The stock is trading at a 50 percent discount to United Spirit’s valuations, according to the brokerage.

The premiumisation strategy has aided Radico Khaitan to become a volume growth leader with Indian made foreign liquor volume growth beat industry growth in the past three-four years. Efficient working capital management and improved profitability would help the distillery player to generate high free cash flows in the coming years.

Besides, with no major capital expenditure on books, the higher cash generated will be utilised for developing more premium brands and potential higher payouts to shareholders, the brokerage said.

A similar view was echoed by Batlivala & Karani Securities India.

Batlivala & Karani Securities India said that the focus on premium product launches, strengthening its existing brands and increasing its reach in the under indexed states provide strong topline growth visibility for the company over the medium to long term.

Further, limited capital expenditure and strong free cash flows generation will aid the company in reducing its leverage further, thus boosting the overall profitability and return ratios, the brokerage added.