Radico Khaitan, maker of Magic Moments vodka, has not only outperformed peers but also become a favourite among domestic institutional investors, with sustained buying reflecting growing confidence in its growth prospects.
Radico Khaitan has stayed well ahead of its peers, not just over the past six months but also on a three-year basis, as the chart shows. Radico's scrip has gained nearly 56% in the past six months, compared to a 12% rise in United Spirits, and a decline of 2% for United Breweries. Institutional confidence in Radico has also strengthened over the past six months. DIIs have raised their stake to 28.08% as of June-end, from 24.03% at the end of December.
It wasn't just the record quarterly volumes in Q1 FY27 that caught investors' attention. Equally important, market participants said, was management's decision to raise its FY27 guidance, signalling confidence in the company's ability to sustain growth momentum and deliver on its earnings trajectory.
Ajay Thakur, research analyst at Anand Rathi Institutional Equities, said Radico Khaitan's standout quarterly performance was largely driven by its Prestige & Above (P&A) portfolio. “The P&A portfolio continues to be the company's biggest growth engine,” he said, noting that it contributes around 50% of volumes but accounts for more than 70% of revenue.
He believes the company has not only outperformed peers so far but is also well placed to maintain that lead. His optimism is anchored in the company's growth guidance, which, if realised, should continue to translate into healthy earnings growth, he said.
Both total volumes and Prestige & Above (P&A) volumes hit their highest-ever quarterly levels in Q1 FY27. Total volumes grew 2.8% to 10 million cases, while P&A volumes jumped 35.8% to 5.22 million cases.
P&A sales growth has significantly outpaced peers such as United Spirits, Allied Blenders and Tilaknagar, driven by sustained momentum in Magic Moments and its luxury portfolio, JM Financial Institutional Securities said in a note following Radico Khaitan's post-earnings call. Margin, too, delivered a positive surprise with gross margin improving quarter-on-quarter despite raw material inflation (against peers suffering compression), driven by better product mix and benign ENA (Extra Neutral Alcohol) prices, the report said.
According to Sunny Agrawal, head - fundamental research at SBI Securities, Radico continues to post strong numbers driven by aggressive premiumization strategy and robust brand momentum particularly in the vodka and single malt categories.
Its near-term guidance to become net debt-free and deliver better margins gives investors confidence for medium-term growth, he said.
Management has upgraded its FY27 guidance, now expecting P&A volumes to grow by more than 25%, up from its earlier projection of 20%.
The company also expects to sustain an earnings before interest, taxes, depreciation, and amortisation (Ebitda) margin of around 20% in FY27.
“With premium and luxury brands contributing an increasing share of our business, we remain confident of continued margin expansion and expect to deliver EBITDA margin of around 20% for the full year FY2027, while strengthening our portfolio of market-leading brands and creating sustainable long-term value for all our stakeholders," Radico said in its latest investor presentation.
Naveen Trivedi, executive director, research analyst - consumer & FMCG, institutional equities, Motilal Oswal Financial Services, is upbeat on Radico Khaitan's prospects. He believes the company's strong momentum in the P&A segment, coupled with its strategic expansion into premium and luxury spirits, continues to strengthen its growth story.
According to him, Radico's sharp focus on premiumisation, operating leverage and widening geographic footprint has helped it consistently deliver industry-leading growth. "Rich valuations are well justified by its continued strong performance," he said. Motilal Oswal has maintained its 'buy' rating on the stock with a target price of ₹5,000.
He also sees Karnataka's recent excise policy changes as an added tailwind, saying they are likely to further boost Radico's already fast-growing P&A portfolio.
According to Bloomberg, 19 brokerages have a ‘buy’ rating on the stock, while 4 analysts have a ‘hold’ recommendation and only 2 have recommended ‘sell’.
At ₹4,370, the stock trades at 73.4 times estimated FY27 earnings and 59.5 times estimated FY28 earnings. “However, considering a medium-term fair value of ₹4,885, the stock still offers some upside,” SBI Securities' Agrawal said.
Radico’s scrip is currently trading at a price to earnings ratio of 97.3 times, which is significantly higher than its five-year average multiple of 71.6.
The key monitorable, however, remains competition. Thakur of Anand Rathi noted that aggressive pricing by rivals, particularly in the Scotch & blended Scotch whisky segment, could put pressure on Radico Khaitan's P&A portfolio.
A CARE Ratings report dated 9 July said that a rating upgrade is likely over the medium term, provided Radico sustains its revenue and profitability growth, with an increasing share of P&A in the overall sales mix, while maintaining a strong leverage and coverage profile.