Radico Khaitan Ltd.|Q2FY15 Result Update | Attractive Valuation |Maintain BUY :: India Nivesh

Please Share::

�� India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details ��

��

-->
ENA prices impacted profitability…
Given the hardening ENA prices (Rs.46.5/per liter) and rise in other expenditures,
reported EBITDA margin contracted to 10.3% (v/s 12.6% in Q2FY14), partially offset
by significant decline in purchase of stock-in-trade (0.6% v/s 1.2% in Q2FY14 – as %
of Rev). In our view, ENA prices could remain high as government has allowed 10%
blending in petrol (v/s earlier 5%) hence huge demand prevails. New glass bottle
prices increased by 6% effective from September 1, 2014.
Other Highlights
 In FY14, the company received the shareholder approval for transfer of Indian
made foreign liquor (“IMFL”) business into the separate subsidiary.
 The company’s recent launch of Morpheus Blue, an upgraded version of the
super-premium Morpheus Brandy and expansion of vodka portfolio (Green
Apple and Orange) delivered growth.
Outlook and Valuation
At CMP of Rs.89, the stock is trading at 10.8x FY15E and 9.4x FY16E Bloomberg
earnings estimates. The current valuation offers attractive discount relative to last
three years average P/E multiples of 19.0x one-year forward earnings. The revival
in flagship brands, premiumisation, and strong macro demand in tier-2 and tier-3

cities, remain positive for the stock. Further, the transformational deal of Diageo
plc with United Spirits Limited could provide window of opportunity to Radico. We
have a target price to Rs.165 (valuing 16.5x FY16E) with BUY on the stock.


LINK
http://www.indianivesh.in/Admin/Upload/635513802029973750_Radico%20Khaitan_Q2FY15%20Result%20Update.pdf