ICICI Direct Research has 'buy' rating on Radico Khaitan with a target price of Rs 400 in the next 12 months. The brokerage views the alcohol beverage manufacturing company's favourable product mix as a key driver to aid robust growth. Moreover, the branded liquor stock is available at compelling valuation, according to ICICI Direct Research.

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"A steep correction in the stock (~30%), despite superior performance parameters (with strong cash flow generation) and continued strong future prospects, makes it a preferred pick in the alcobev sector. In spite of the dominance of two global players in the ‘prestige and above’ segment, Radico has been able to penetrate the segment and create own niche for itself. With a continued focus on brand development, newer premium IMFL launches and strong distribution network built over the years, we ascribe a BUY rating to Radico Khaitan with a target price of Rs 400 (18x FY21E P/E)," ICICI Direct Research said in its report on Tuesday.

The management expects EBITDA margins to remain at 16-17 percent despite the hardening of input prices (ENA, packaging material) in FY20, and also expects to become debt free in two years, the report added.

ICICI Direct expects "Radico to grow its revenues, EBITDA and PAT at 12 percent, 12 percent and 24 percent FY19-21 CAGR, respectively."

Known earlier as Rampur Distillery Company, Radico Khaitan is among the largest manufacturers of Indian made foreign liquor in India. The company is also a supplier of Indian made Indian liquor and bulk alcohol in India. Radico has four millionaire brands 8PM whisky, Contessa Rum, Old Admiral brandy and Magic Moments vodka. The company has three distilleries in Rampur in Uttar Pradesh, and two other distilleries operating in joint venture in Maharashtra's Aurangabad.

Radico Khaitan shares slipped over 3 percent intra-day to Rs 316 per share on Wednesday. At 1.25 pm, Radico shares traded at Rs 316.90, down by 3.09 percent. So far this year, the stock has corrected by more than 20 percent, while the one-year return is negative by 11 percent. In the last 10 years, Radico Khaitan has returned over 180 percent to its shareholders.

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First Published:Sept 25, 2019 2:43 PM IST