Result Update: Radico Khaitan Ltd - ACCUMULATE - TP Rs.460 - Kotak

Radico Khaitan Q3FY19 results was ahead of estimates driven by strong volume growth in prestige and above category and better than estimated EBITDA margins.

Key Highlights

- The net revenue for the quarter grew by 14.6% yoy to Rs 5.5 bn and was ahead of our estimates, driven by 7.2% yoy growth in IMFL volume which was at 5.7 mn cases. Volume in Prestige and above category grew at 18.4% yoy while Regular category grew at a slower pace of 3.4% yoy. Volume growth in regular category slowed due to company reducing supply to Tamil Nadu and Kerala due unattractive prices in those states.

- EBITDA margins in the quarter grew by 160 bps yoy to 17.3% led by premiumization resulting in better realization on yoy. The company expects higher EBITDA margins based on better product mix.

- The company has guided for overall volume growth of 8-9% with prestige and above category expected to grow at 13-15% in volume terms in the longer run. The company targets to achieve EBITDA margins in late teens by FY21E and intends to be debt free in the next 1.5 years.

Valuation & outlook

We have largely maintained our EPS estimates. Based on FY19E/FY20E EPS of Rs 14.7/18.4, the stock is trading at PE of 29.1/23.2x. We maintained our Accumulate rating on the stock with target price of Rs 460, valuing the stock at 25x FY20E EPS.

Shares of RADICO KHAITAN LTD. was last trading in BSE at Rs.420.35 as compared to the previous close of Rs. 427. The total number of shares traded during the day was 85068 in over 2128 trades.

The stock hit an intraday high of Rs. 438.9 and intraday low of 417. The net turnover during the day was Rs. 36509482.

Source : Equity Bulls

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