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Liquor manufacturers in the country continue to benefit from rebounding demand with the easing of covid-led restrictions. The same is reflected in gains seen in stock prices of manufacturers such as Radico Khaitan Ltd. The stock is up 95% in the current fiscal.

The financial performance reported by the company during the second quarter also indicated a good rebound. The company that is amongst the key manufacturers of Indian-made foreign liquor (IMFL) saw total IMFL volume grow 7.1% year on year. 

The performance continues to be lifted by rising shares and volumes of prestige & above (P&A) brands. P&A brands volume of 1.99 million cases marked a 17.7% year-on-year growth. P&A brands' contribution to the total IMFL volumes thereby grew to 30.8% compared to 28.0% in the year-ago quarter.

This also meant that the company reported a healthy performance, with top-line growth of 13.5% year-on-year. Notably, the growth outpaced industry growth of 7% highlighted analysts.

"The increasing success of innovations, strong core brands and new initiatives in the premium segments are likely to sustain the outperformance and market share gains in P&A," said analysts at Emkay Global Financial Services Ltd.

The company saw its Ebitda grow by 4% year-on-year, However, margins at 15.7% were lower than 16.9% in the year-ago quarter. The same is attributed to high-cost pressure in the non-IMFL segment.

However, as the demand is improving analysts expect the company to take price hikes in the non-IMFL segment during the ensuing quarters. This should help margin trajectory.

Meanwhile, with strong volume growth, improving balance sheet is also boosting the earnings prospects of the company. Strong cash flow generation led to a net debt reduction of over 79 crore since March 2021.

Analysts at Anand Rathi Research said the strong balance sheet and better return profile offer sound assurance and they expect healthy sales and Ebitda CAGR (compound annual growth) of 12% and 22%) over FY22-24. “Superior execution, market-share gains and scaling up of launches in P&A would drive the portfolio mix and margin expansion over FY22-24," they added.

ABOUT THE AUTHOR

Ujjval Jauhari

Ujjval Jauhari is a deputy editor at Mint, with over a decade of experience in newspapers and digital news platforms. He is skilled in storytelling, reporting, analysing and writing about stocks, investment ideas, markets, corporates and more. He is based in New Delhi.
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