Radico Khaitan Share Price Target at Rs 3,090: Sharekhan Research
Radico Khaitan Ltd (RKL), one of India’s leading spirits companies, has received a reaffirmed ‘Buy’ recommendation from Mirae Asset Sharekhan, with a revised price target (PT) of Rs 3,090. The brokerage underscores RKL’s robust growth trajectory, driven by aggressive premiumisation, margin expansion, and a strategic focus on debt reduction. With the stock currently trading at Rs 2,592, the report highlights an 18% revenue CAGR and 41% PAT CAGR expected over FY25-27, supported by new launches in luxury and premium segments, operational efficiencies, and strong free cash flow generation. The company’s ongoing transformation positions it to outpace industry peers, but investors should remain vigilant about regulatory risks and raw material price volatility.
Investment Thesis and Recommendation
Mirae Asset Sharekhan Reiterates ‘Buy’ with Upgraded Target
The research house maintains its ‘Buy’ rating on Radico Khaitan Ltd, revising the price target to Rs 3,090, reflecting confidence in the company’s premiumisation strategy and operational execution.
At the current market price of Rs 2,592, the stock trades at 67x FY26E and 50x FY27E earnings, indicating a premium valuation justified by high growth expectations and improving return ratios.
Key Financial Levels and Investor Targets
Stock Levels and Valuation Metrics
Current Market Price (CMP): Rs 2,592
Price Target (PT): Rs 3,090 (upside potential of ~19% from CMP)
FY26E/FY27E P/E: 66.9x / 50.3x
Market Capitalization: Rs 34,681 crore
52-week High/Low: Rs 2,790 / Rs 1,628
Projected Financial Performance
Revenue CAGR (FY25-27E): 18%
PAT CAGR (FY25-27E): 41%
OPM (Operating Profit Margin) Target: Late teens by FY27 (from 13.9% in FY25)
Debt Reduction Target: 35-40% in FY26, near debt-free by FY27
Return on Equity (RoE) / Return on Capital Employed (RoCE) FY27E: 18% / 22.4%
Premiumisation: The Core Growth Driver
Prestige & Above (P&A) Segment Outperformance
The P&A segment, comprising 69% of IMFL revenue, has delivered a 25% revenue CAGR and 19% volume CAGR during FY21-25, driven by flagship brands like Magic Moments Vodka, After Dark, and 8PM Premium Black.
Contribution of P&A to total volumes rose from 28% in FY19 to 46% in FY25, with expectations to reach 52% by FY27, underpinned by new launches and distribution expansion.
Launch Pipeline and Distribution Expansion
Recent launches in luxury and premium categories—such as Royal Ranthambore, Jaisalmer Gin, and Morpheus Brandy—are gaining traction.
The company is aggressively expanding its reach in both domestic and international markets, currently exporting to over 100 countries.
Margin Expansion and Operational Efficiencies
Cost Optimisation and Backward Integration
The commencement of the Sitapur distillery and a shift from glass to PET bottles in the regular segment, along with packaging rationalization, are driving cost savings and supporting margin improvement.
Stable or declining raw material prices, coupled with operating leverage from higher volumes, are expected to yield a ~100 bps annual improvement in OPM over the next 2-3 years.
FTA Benefits and Margin Outlook
The anticipated UK-India FTA is projected to further enhance profitability by reducing import duties.
The company targets OPM in the late teens by FY27, up from 13.9% in FY25.
Debt Reduction and Strengthening Return Profile
Capex Completion and Free Cash Flow Generation
RKL has completed significant capex (~Rs 950 crore since April 2022) for capacity expansion, funded primarily through debt.
With no major capex planned in the medium term, management targets a 35-40% reduction in debt in FY26 and aims to be nearly debt-free by FY27, supported by robust free cash flow generation.
Improvement in Return Ratios
Strong earnings growth and deleveraging are expected to drive RoE to 18% and RoCE to 22.4% by FY27, from 13% and 15% in FY25, respectively.
Segmental Portfolio and Market Position
Diversified Product Portfolio Across Price Points
RKL’s portfolio spans luxury, semi-luxury, super-premium, semi-premium, deluxe, and popular segments, with leading brands in each category.
The company operates five distilleries and 43 bottling units across India, solidifying its position as a top supplier to the Canteen Stores Department (CSD) and a key exporter.
| Segment | Indicative MRP (Rs) | Key Brands |
|---|---|---|
| Luxury | >4,000 | Rampur Indian Single Malt, Jaisalmer Indian Craft Gin |
| Semi Luxury | 1,200-4,000 | Royal Ranthambore, Morpheus Blue |
| Super Premium | 800-1,200 | Morpheus, Magic Moments Verve |
| Semi Premium | 650-800 | 8PM Premium Black, Magic Moments |
| Deluxe | 480-650 | After Dark, Whytehall |
| Popular | <480 | 8PM, Contessa, Old Admiral |
Risks to the Investment Thesis
Regulatory and Raw Material Volatility
Changes in liquor policies at the state level, increases in excise rates, or volatility in raw material prices (notably ENA and packaging materials) could impact margins and growth.
A slowdown in global or domestic economic growth poses a risk to demand for premium products.
Peer Comparison and Valuation Context
Relative Valuation Table
| Company | P/E FY27E | EV/EBITDA FY27E | RoCE FY27E (%) |
|---|---|---|---|
| Radico Khaitan | 50.3 | 32.5 | 22.4 |
| Allied Blenders & Distillers | 36.5 | 20.1 | 19.2 |
While RKL trades at a premium to peers, the valuation is supported by superior growth, strong brand equity, and improving capital efficiency.
Long Term Investment Outlook
Radico Khaitan’s strategic focus on premiumisation, operational efficiency, and prudent capital allocation underpins a compelling investment case. With a well-diversified product portfolio and expanding global footprint, the company is poised for sustained outperformance. Investors are advised to accumulate the stock with a target of Rs 3,090, while closely monitoring regulatory developments and input cost trends.
