Radico Khaitan’s outlook bright with better performance in reputation segment

The financial performance reported by the company during the second quarter also indicated a good rebound. The company which is one of the major manufacturers of Indian Made Foreign Liquor (IMFL), witnessed a year-on-year growth of 7.1% in the total IMFL volumes.

Performance continues to improve, driven by rising shares and volume of prestige and above (P&A) brands. P&A brand volumes of 1.99 million cases registered a growth of 17.7% yoy. The contribution of P&A Brands to total IMFL volumes increased to 30.8% from 28.0% in the year-ago quarter.

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

“The growing success of innovations, a strong core brand and new initiatives in the premium segment are expected to drive better P&A performance and increase in market share,” said analysts at Emkay Global Financial Services Ltd.

The company saw its EBITDA increase 4% year-over-year, however, margins at 15.7% were down from 16.9% in the year-ago quarter. This is due to higher cost pressures in the non-IMFL segment.

However, as demand is improving, analysts expect the company to hike prices in the non-IMFL segment during the coming quarters. This should help the margin trajectory.

Meanwhile, along with strong volume growth, an improvement in the balance sheet is also boosting the company’s earnings prospects. Net debt decreased on strong cash flow generation 79 crore from March 2021.

Analysts at Anand Rathi Research said a strong balance sheet and superior return profile provide sound assurance and they expect healthy sales and EBITDA CAGR (compounded annual growth of 12% and 22%) in FY22-24. “Improved execution, increase in market share and increase in P&A launches will drive portfolio mix and margin expansion in FY22-24,” he added.