Radico Khaitan extends rally on strong Q2 results; soars 28% in 4 weeks

Shares of Radico Khaitan rallied 6.5 per cent to Rs 436 on Tuesday, extending their past four weeks gain on the BSE, after the company reported a strong 73 per cent year-on-year (Y-o-Y) jump in net profit at Rs 495 million in September quarter (Q2FY19). The liquor firm had reported a profit of Rs 286 million in the year-ago quarter.

Operational revenue grew 28 per cent to Rs 19.06 billion on Y-o-Y basis. EBITDA margin expanded 300 basis points (bps) Y-o-Y to 17.71 per cent in Q2FY19 from 14.65 per cent in Q2FY18.

The growth during the quarter was driven significantly by improved operating environment and it has recently received price increases across a number of key IMFL consuming states. The company reported healthy numbers for the fourth consecutive quarter.

Post Q2 results, Radico Khaitan has outperformed the market by surging 28 per cent from Rs 340 on October 23, 2018. In comparison, the S&P BSE Sensex was up 2.8 per cent during the same period. The stock was trading 13 per cent lower against its all-time high price of Rs 500 touched on September 3, 2018 on the BSE in intra-day deals.

“Radico Khaitan’s niche segment and geographic presence, market share gains, premiumisation, price increases, and raw material tailwinds have been the key factor driving superior growth. The company has effectively utilized its superior growth in trailing 2.5yrs to de-leverage (net debt down from Rs 9 billion to Rs 3.6 billion); for new launches, branding and promotions (S&D +33% in trailing 12m, + 25% in 2QFY19),” analysts at HDFC Securities said in result review.

The brokerage firm maintains ‘buy’ rating on the stock with 12-month target price of Rs 548 per share as near-term outlook remains robust for the company, led by volume growth, especially, from UP market, premiumisation and raw material tailwinds.

At 10:40 am, the stock was trading 5.7 per cent higher at Rs 433, as compared to 0.15 per cent decline in the S&P BSE Sensex. The trading volumes on the counter more-than-doubled with a combined 1.13 million shares changed hands on the BSE and NSE so far.

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