MOFSL projects 22% upside for this liquor stock; up 2% in weak market today

Business Standard

27-05-2025

Radico Khaitan share price: Liquor maker Radico Khaitan shares traded higher in a weak market on Tuesday, May 26, 2025 with the stock rising as much as 1.56 per cent to hit an intraday high of ₹2,478.80 per share.
At 1:00 PM, shares of Radico Khaitan were up 0.75 per cent at ₹2,458.90, while the benchmark BSE Sensex was down 0.71 per cent at 81,596.31.
Why did Radico Khaitan shares rise in a weak market?
The uptick in Radico Khaitan shares came after domestic brokerage Motilal Oswal Financial Services Limited (MOFSL) initiated coverage on the stock with a 'Buy' rating. The brokerage set a target price of ₹3,000, implying a 22 per cent upside from the previous close of ₹2,453.
'Radico Khaitan is currently trading at 67x/53x FY26E/FY27E P/E with a RoE/RoIC of ~17 per cent/19 per cent in FY27E. We believe a ~30 per cent EPS CAGR is good enough for sustaining rich valuations. We value the company at 60x P/E on Jun'27E EPS to derive a TP of ₹3,000,' analysts at Motilal Oswal said, in a note.
Other reasons behind initiating coverage
Motilal Oswal analysts highlighted that Radico Khaitan is among the oldest and largest Indian Made Foreign Liquor (IMFL) producers, with net revenue of ₹48,000 crore and a volume of 31 million cases in FY25. Its premium & above (P&A) segment alone contributed ~15 million cases.
Formerly Rampur Distillery Company, Radico started operations in 1943 as a bulk spirits supplier and now owns well-known brands such as 8PM, Magic Moments, Royal Ranthambore, Rampur Single Malt, After Dark, Morpheus, Contessa, and Jaisalmer.
The company, analysts said, has upgraded its brand perception in recent years and successfully ventured into the luxury segment with launches like Rampur, Ranthambore, and Jaisalmer. With offerings across whiskey, vodka, gin, rum, and brandy, priced between ~₹500 to over ₹8,000, Radico Khaitan serves a broad consumer base. ALSO READ |
The strong market acceptance of its premium brands highlights the company's long-term brand evolution. Analysts believe Radico Khaitan can build on this momentum by expanding its brand portfolio to capture untapped high-volume segments.
Radico Khaitan currently holds ~8 per cent market share in the P&A segment within the IMFL industry. Vodka contributes ~50 per cent of its P&A sales, with the company commanding over 80 per cent share in the P&A vodka market. It has also been growing its P&A whiskey segment, which now accounts for ~5 million cases.
Although its industry share in this category remains modest at 3 per cent, analysts see strong growth potential and believe the company can sustain double-digit volume growth in the P&A segment over the medium-term.
Besides, from FY19 to FY25, Radico Khaitan delivered 15 per cent revenue compound annual growth rate (CAGR), driven by a 12 per cent CAGR in its IMFL business (70 per cent of total revenue) and a 23 per cent CAGR in non-IMFL (30 per cent of revenue).
Within IMFL, the P&A portfolio — which makes up 70 per cent of segment sales — clocked a 20 per cent revenue CAGR and 13 per cent volume CAGR. However, rising input costs, particularly in ENA and glass, led to a decline in gross margin from 51.4 per cent in FY19 to 42.8 per cent in FY25. Ebitda margin also contracted, though more modestly, from 16.5 per cent to 13.9 per cent during the same period. ALSO READ |
Analysts also highlighted that Radico Khaitan has been one of the top-performing consumer stocks, delivering 25x returns over the past decade and 8x over the last five years. Its valuation multiples have seen a major re-rating thanks to the consistent performance of its P&A portfolio.
Still, analysts believe the stock has more room to run, backed by earnings growth potential over the next 3–5 years.
Radico Khaitan's P&A volumes are ~15 million cases, compared to the industry total of ~200 million cases in this category and ~400 million in the broader IMFL space.
Key downside risks
Key downside risks, analysts believe, include a sharp rise in ENA and glass prices, a potential hike in excise duty amid fiscal stress in several states due to populist spending, and intensifying competition in the industry.
That said, with expansion plans underway in the premium and luxury segments — where volumes are considerable — analysts see Radico Khaitan increasing its market share and strengthening its execution capabilities, which should aid in the successful rollout of new products.