Buy Radico Khaitan; target of Rs 550: ICICI Direct

ICICI Direct's research report on Radico Khaitan

Radico Khaitan reported volume growth of 5% YoY in Q2FY21 (in spite of 9-10% de-growth for the liquor industry). Exports clocked 70% growth reaching 8-9% of revenues (ex-exports flattish volume growth). Subsequently, revenues grew 11% to Rs 630 crore. Gross margin increased 90 bps to 48.9% owing to better state & product mix and price hike in Telangana. Subsequently, the company reported 180 bps expansion in EBITDA margin at 17% supported by lower employee expense. Consequently, EBITDA grew 24% YoY to Rs 107 crore. Higher other income in Q2FY21 and exceptional expense in the base quarter led PBT after extraordinary expense to grow 50% to Rs 92 crore. Further deferred tax benefit in the base quarter led net profit to decline 6% to Rs 75 crore.

Outlook

The company is also expected to become debt free in a year or two (post that expect higher dividend payout and buybacks). We maintain our BUY rating on the stock with a revised target price of Rs 550/share (~22x FY22E EPS).

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