Views on Radico Khaitan 1QFY2016 Results - Angel Broking

Views of Mr. Amarjeet Maurya (Sr. Research Analyst - Mid Caps, Angel Broking) on Radico Khaitan 1QFY2016 Results:

"Radico Khaitan's 1QFY2016 results outperformed our estimates. The company's top-line grew by a healthy ~7% yoy to ~Rs395cr (our estimates was of around Rs365cr), mainly due to healthy growth in prestige and above products segment. On the operating front, the company reported margin contraction (down by 112bp yoy to 11.9%), primarily on account of higher other costs. However, we see reduction in raw material prices which is a good sign for the company. The reported net profit grew by 9% yoy to ~Rs18cr (our estimates was of around Rs16.5cr) on account of lower interest cost (in FY2015 the company has repaid a significant amount of its debt; further debt reduction is also on the cards) and lower taxes.

Further, the company has not performed well in the last two years due to increasing material costs (ENA is a key raw material) and with it not receiving significant price hikes from various states. We expect the company to perform well going forward in anticipation of easing material costs and on expectation of better price hikes. This would result in an overall improvement in the operating margin of the company. We are positive on Radico Khaitan and recommend a BUY rating on the stock."

Source : Equity Bulls

Keywords