Mukul Agrawal alcohol stock trading at a discount of 22% to add to your watchlist

The global demand for Indian spirits is increasing, presenting an opportunity for growth. APEDA aims to promote Indian alcoholic and non-alcoholic beverages globally, targeting $1 billion in export revenue. As part of the ‘Make in India’ initiative, APEDA is focused on expanding exports to key international markets. In 2023-24, India’s alcoholic beverage exports surpassed $262.1 million (Rs. 2,200 crore), with India ranking 40th globally.

Price Action

The shares of Radico Khaitan Ltd, with a total market capitalization of Rs 27,765 Crores on Thursday, closed at Rs 2,075 per share which was 1.3 percent up from its previous closing price of Rs 2,048. The shares are currently trading at a discount of 22 percent from its 52 week high of Rs 2,637.70 per share.  

The shares of Radico Khaitan Ltd generated a one year return of 27 percent, three year return of 130 percent and a stellar 386.4 percent return in the past five years.  

New Developments

The new products under the company’s Luxury Portfolio which was launched earlier this year continue to expand the rollout in more states. Rampur Indian Single Malt Asava is now available in 10 states, Sangam World Malt  in 8 states, and Jaisalmer Gold Gin in 6 states. The company focuses on increasing distribution channels for luxury products both in domestic and international markets. 

Future Outlook

The management is optimistic about the growth prospects in the Indian alcoholic beverage sector due to a strong product pipeline and strategic focus on brand building. The company aims to drive profitable growth, enhance cash flow generation, and improve working capital management for debt reduction. The management remains cautious about inflationary trends in raw materials, particularly food grains, which could impact gross margins.

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Market Factors

The company has seen a sharp recovery in the regular category, attributed to a lower base and normalization of state-specific industry issues. The change in the route-to-market in Andhra Pradesh contributed 800 basis points to their overall volume growth. Their market share in Andhra Pradesh increased from 10 percent in the first half to over 15 percent in Q3 FY25 due to a favorable regulatory environment.

Margin Guidance

The management expects a margin improvement of 100 to 125 basis points annually over the next three years, driven by a shift towards higher-margin luxury products.The Luxury & Semi-Luxury segment is expected to contribute significantly to overall profitability.

Portfolio Performance

The Luxury Portfolio, including Rampur Indian Single Malt Whisky, Sangam World Malt, and Jaisalmer Indian Craft Gin, continues to grow significantly. Luxury & Semi-Luxury brands crossed net sales value of Rs 100 crores in Q3 FY25 and Rs 250 crores in 9MFY25 and the company expects this to cross Rs. 500 crores net sales mark in FY26 supported by robust demand both in domestic and international markets. 

Total IMFL volume reached 8.4 million cases in Q3 FY25 representing a growth of 15.3 percent YoY and the Prestige & Above category volume increased by 18%.

Financials 

The company reported a growth of 11.5 percent YoY in revenue from operations from Rs 1,161 Crores in Q3FY24 to Rs 1,294 Crores in Q3FY25. Their Net Profits saw a growth of 27 percent YoY from Rs 75 Crores to Rs 95 Crores over the same period. 

About Radico Khaitan Ltd

Radico Khaitan Limited is a prominent Indian liquor company producing IMFL, industrial alcohol, country liquor, and fertilizers. It is a major supplier of branded IMFL to the Canteen Stores Department (CSD), with high entry barriers.

The company owns a capacity of 320 million liters across 43 bottling units and is one of India’s largest alcoholic beverage exporters, with a presence in over 102 countries. Ace Investor Mr. Mukul Agarwal holds 1.05 percent stake in Radico Khaitan Ltd as of Q3FY25. 

Written By Adhvaitha Nayani

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