4 Novemeber 2016
Q2FY17 Results Update | Sector: Consumer
Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
Avg Val, INRm/ Vol m
Free float (%)
18.2 / 0.3
151 / 84
Performance slightly better than expectation
Radico Khaitan’s (RDCK) net sales increased 11.1% YoY
(est. of +9%) to
INR4.5b (Ind-AS), with underlying volume growth of 4.5% YoY to 4.48m cases.
EBITDA grew 15.8% YoY to INR568m as operating margin expanded 50bp YoY
to 12.7%. Adj. PAT rose 26.8% YoY to INR225m.
Gross sales rose 18.9% YoY to INR12.0b,
while excise duty increased 23.7% YoY
(excise duty in 2QFY17 was 63.5%, +250bp YoY). Overall volumes rose 4.5% YoY
to 4.48m cases, partly aided by healthy 10% volume growth in UP after excise
cut in April. Premium brands volumes grew 13% YoY to 1.2m cases, accounting
for 26.7% of portfolio volumes in 2QFY17 (+200bp YoY).
Gross margin contracted 200bp YoY to 41.8%
in 2QFY17. Increase in raw
material prices and higher selling & distribution cost (+230bp YoY) were offset
by a fall in other expenses (-430bp YoY) and lower staff costs (-50bp YoY),
aiding EBITDA margin expansion of 50bp YoY to 12.7%.
Management call takeaways:
a) Local Body Tax in Maharashtra affected
margins in 2QFY17; have taken price hike in October to offset this impact. b)
While ENA prices have increased ~10% YoY, costs are likely to be stable. c)
Electra, the ready-to-drink product launched last year, has seen good traction.
Valuation and view:
We marginally change our estimates for FY17 and FY18.
RDCK continues to focus on driving its premium portfolio, given challenging
margin dynamics of the regular portfolio. We downgraded the stock recently
after its run-up by more than 40% post 1QFY17 results. We also roll forward
our estimates to Sep-2018E to arrive at a revised target price of INR140 (15x
Sep-18 EPS). Spike in ENA and molasses prices are key risks.
Financials & Valuations (INR b)
2016 2017E 2018E
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
(Krishnan.Sambamoorthy@MotilalOswal.com); +91 22 3982 5428
(Vishal.Punmiya@MotilalOswal.com); +91 22 3980 4261