Multibagger stock: Radico Khaitan generates over 400% returns in 4 years, up 1500% in 8 years

The Indian liquor industry is experiencing a substantial surge in demand, driven by changing consumer preferences and a growing middle class. As social norms evolve and disposable incomes rise, more consumers are embracing alcohol as a part of their lifestyle. The rising popularity of premium brands is further fueling growth in the sector.

Against this backdrop, companies in the sector are experiencing solid volume growth and higher per-case realisations. Notably, the premium liquor segment has shown strong momentum, benefiting companies like Radico Khaitan, which has developed a robust portfolio of premium and luxury alcohol brands.

The company, which derives nearly 50 percent of its revenues from the Prestige and Above (P&A) category, has experienced a notable increase in volumes during FY24, a trend that has continued into the first quarter of the current financial year.

This strong performance has been reflected in the company's stock price, which surged by 70 percent in CY23. The momentum has continued into the current year, with the stock showing sharp gains.

So far this month, Radico Khaitan's stock has rewarded shareholders with a 7 percent gain and achieved a new milestone by crossing the ₹1,900 mark for the first time, reaching an all-time high of ₹1,910 per share.

This recent rally has driven the stock to an impressive 411% gain over the past four years and 1,500% in eight years. Notably, the stock closed in positive territory for 35 out of the last 48 months.

Healthy performance

The company reported a 14.3 percent year-on-year (YoY) surge in volume growth for its P&A category in the quarter ending June. This segment now constitutes 43.4 percent of the company's total volume.

Looking ahead, the company is confident of achieving double-digit premium volume growth in FY2025. Meanwhile, demand in the regular category fell below expectations due to an uptrend among certain consumers and a slowdown at the lower end.

During the quarter, the company launched three new products under its Rampur, Sangam, and Jaisalmer brands, with prices starting at ₹4,000 and exceeding ₹10,000.

It has recorded a 21.9 percent YoY increase in vodka sales, with a volume of 1.9 million cases, pushing its net sales value to over ₹300 crore in Q1FY25. Its flagship Magic Moments brand now commands 60 percent of the overall vodka market share in India. Additionally, Radico Khaitan holds a 64 percent share in the super-premium brandy category, per the company's earnings filing. 

The company also saw its net profit jump by 20.7 percent during the quarter, reaching ₹76.3 crore, compared to ₹63.2 crore in the same period last year.

Bullish outlook maintained

Elara Capital has maintained its ‘buy’ rating on the stock following the company's Q1 FY25 earnings, setting a target price of ₹2,000 per share. The Radico Khaitan stock remains the brokerage's top pick in the alcoholic beverages sector, driven by strong volume growth in the P&A category and ongoing margin expansion. These factors are expected to result in a healthy earnings CAGR of 25.8 percent from FY25 to FY27.

The company's leadership in the vodka market and consistent innovation in the premium and luxury whiskey segments support a positive medium-term outlook for the stock. The brokerage has identified key factors, such as the cooling of grain prices and volume recovery in the regular segment, as crucial drivers for future share price performance.

IMFL growth to continue

The growth of the Indian IMFL (Indian Made Foreign Liquor) sector is anticipated to be fueled by favourable demographics, a shift towards premiumisation, and an increasingly aspirational consumer base. Spirits companies are expected to innovate and invest in quality to cater to evolving consumer preferences, particularly in premium offerings.

Despite challenges such as raw material inflation, which has impacted profitability, the industry is managing through price adjustments approved by various states. This trend supports premiumisation, as higher-priced products are less affected by inflation.

According to Euromonitor International, IMFL volumes are projected to reach 511 million cases by 2028, with a sales volume CAGR of 5.6 percent from 2024 to 2028, and the industry value is expected to grow by 11.0 percent. The white spirits segment, particularly vodka and gin, is forecast to grow even faster, driven by the rising cocktail culture.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.