Buy Radico Khaitan; target of Rs 600: Emkay Global Financial

Emkay Global Financial's report on Radico Khaitan

RDCK’s volumes have grown at a 10% CAGR with faster growth in P&A at a 14% CAGR since FY17, outperforming the industry. Vodka offers a big opportunity in terms of global trends and RDCK with a 60% share in premium Vodka is a natural beneficiary as the category becomes more mainstream. With equal success in new products (40% of P&A), RDCK has diversified the portfolio and accelerated growth. Cash flow improvement has outpaced revenue gains, substantially strengthening the balance sheet, partly aided by favorable industry changes. As the impact of Covid-19 fades, we expect sales/earnings to recover and rise at a 13%/18% CAGR through FY23, with continued improvements in cash flows and ROEs.

Outlook

We expect RDCK to up-trade at 25x Sep’22E EPS with a more diversified revenue profile and accompanying higher economic profits. We reiterate Buy with a revised TP of Rs600 (from Rs500).

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