Result Update: Radico Khaitan - ACCUMULATE - TP Rs.421 - Kotak

Radico Khaitan Ltd (RKL) Q4FY18 results were ahead of estimates in terms of revenue as well as earnings driven by decent volume growth of 12.5% yoy, improvement in gross margins and lower interest expenses.

Key Highlights

- The net revenue for the quarter grew by 22.3% yoy to Rs 4.8 bn and was ahead of our estimates of Rs 4.4bn, led by strong volume in the quarter which grew by 12.5% YoY to 4.85 mn cases. The volume growth was driven by 13.1% growth in the regular segment after it got price increase in states like Telangana, Andhra Pradesh, etc.

- EBITDA margins in the quarter improved by 190 bps yoy to 13.8% led by lower raw material prices, improved mix and price hike. The company expects 100 bps improvement in EBITDA margins in FY19 based on full benefits of price hikes and lower raw material prices.

- The company is targeting at 10% plus volume growth across both regular and Prestige & above category in FY19.

Valuation & outlook

- We have factored in higher volume growth in regular category, improvement in EBITDA margins and lower interest expenses in our estimates and expect RKL's PAT to grow at 30% CAGR in FY18-20.

- Based on FY19E/FY20E revised EPS of Rs 12.6/15.6, the stock is trading at PE of 31/25x. We upgrade our rating on the stock to Accumulate (from Sell) with revised target price of Rs 421 (Vs Rs 372), factoring in higher earnings growth and lower leverage.

Shares of RADICO KHAITAN LTD. was last trading in BSE at Rs.402.85 as compared to the previous close of Rs. 390.85. The total number of shares traded during the day was 193242 in over 2456 trades.

The stock hit an intraday high of Rs. 407.5 and intraday low of 385. The net turnover during the day was Rs. 77475255.

Source : Equity Bulls

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