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Radico Khaitan
Structural growth drivers playing out
„Strong Dec Q supported by structural drivers; Buy
Dec Q profit came in at Rs2bn, up 77% yoy. We are encouraged by strong growth
in higher margin main line brands, sharp gross margin expansion and halving of
interest costs. Miss in earnings was due to lower sales growth and surge in other
expenditure. We have cut our FY11-13E estimates and PO by 10-12% to factor in
increased overheads. Maintain Buy on attractive valuations for strong earnings
CAGR of 75% over FY10-13E led by healthy volume growth and premiumization.
Sales growth in main line brands is encouraging
Dec Q volume growth of 11% yoy was 4% lower than our est on decline in sales
of fringe brands. Though overall sales missed our estimates we like the quality of
the sales growth. 8PM revived smartly with 26% yoy growth as re-launch has
evoked good consumer response. Magic Moments continues its strong growth
momentum with 37% yoy growth keeping the premiumization trend intact.
Margins remain flat as overheads offset gross margin gains
Gross margins improved 340bp, in line with our est led by strong premiumization
and steady input costs. Key negative surprise was the 230bp jump in overheads
due to rise in power and fuel costs. We believe improvement in gross margin is
positive and have factored in increased overheads. Molasses output has picked
up sharply and we expect price decline to set in following increased supply.
Strong earnings growth with attractive valuation; Buy
Our key thesis of 1) premiumization 2) gross margin expansion and 3) fall in
interest costs have played out during the quarter. National launch of After Dark
premium whisky is running smoothly. Post correction, stock is trading at
20xFY11E and 12xFY12E by far the cheapest stock under our coverage and we
believe given the strong earnings growth outlook there is a case for re-rating.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Radico Khaitan
Structural growth drivers playing out
„Strong Dec Q supported by structural drivers; Buy
Dec Q profit came in at Rs2bn, up 77% yoy. We are encouraged by strong growth
in higher margin main line brands, sharp gross margin expansion and halving of
interest costs. Miss in earnings was due to lower sales growth and surge in other
expenditure. We have cut our FY11-13E estimates and PO by 10-12% to factor in
increased overheads. Maintain Buy on attractive valuations for strong earnings
CAGR of 75% over FY10-13E led by healthy volume growth and premiumization.
Sales growth in main line brands is encouraging
Dec Q volume growth of 11% yoy was 4% lower than our est on decline in sales
of fringe brands. Though overall sales missed our estimates we like the quality of
the sales growth. 8PM revived smartly with 26% yoy growth as re-launch has
evoked good consumer response. Magic Moments continues its strong growth
momentum with 37% yoy growth keeping the premiumization trend intact.
Margins remain flat as overheads offset gross margin gains
Gross margins improved 340bp, in line with our est led by strong premiumization
and steady input costs. Key negative surprise was the 230bp jump in overheads
due to rise in power and fuel costs. We believe improvement in gross margin is
positive and have factored in increased overheads. Molasses output has picked
up sharply and we expect price decline to set in following increased supply.
Strong earnings growth with attractive valuation; Buy
Our key thesis of 1) premiumization 2) gross margin expansion and 3) fall in
interest costs have played out during the quarter. National launch of After Dark
premium whisky is running smoothly. Post correction, stock is trading at
20xFY11E and 12xFY12E by far the cheapest stock under our coverage and we
believe given the strong earnings growth outlook there is a case for re-rating.
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