Allied Blenders premium portfolio and backward integration support FY28 margin expansion

Investment View and Key Thesis

In its July 25, 2026 result update on Allied Blenders & Distillers Ltd (ABDL), ICICI Securities retained its BUY recommendation and a target price of Rs 728. The broker highlighted the scaling Prestige & Above (P&A) portfolio, particularly ICONiQ White, and the medium-term margin expansion opportunity from backward integration, premiumisation and operating leverage.

ABDL has 18 IMFL brands, including four Millionaire brands, with premiumisation central to its long-term strategy.

Q1FY27 Operating and Financial Performance

ABDL reported consolidated Q1FY27 net sales of Rs 978.9 crore, up 6.1 per cent year on year but down 2.8 per cent sequentially. Total sales volumes rose 7.1 per cent year on year to 9.1 million cases.

P&A realisation increased 4.9 per cent, whereas regular-brand realisation declined 1.9 per cent. Gross margin expanded 277 basis points year on year to 46 per cent, supported by favourable input costs, product mix and backward integration. However, EBITDA margin declined 30 basis points to 11.8 per cent, while EBITDA increased 3.5 per cent to Rs 115.5 crore.

Higher luxury-brand investment, employee cost growth of 27.2 per cent and a Rs 24 crore impact from global supply-chain disruption offset the gross-margin gains. Excluding the disruption, EBITDA margin would have been 14.2 per cent, up about 210 basis points year on year. Adjusted PAT declined 18.7 per cent to Rs 45.4 crore, due to higher depreciation following commissioning of the Rangapur PET-bottle facility and lower other income.

Premiumisation and Brand Growth

ICONiQ White was the principal growth driver, with volumes rising 33.8 per cent year on year to a highest-ever quarterly level of 3.1 million cases. Management guided for approximately 40 per cent ICONiQ volume growth in FY27 to 15 million cases, supported by expansion in Karnataka, Telangana, Andhra Pradesh, the CSD channel and international markets.

Management plans to reset Officer's Choice Blue in Q3FY27 and relaunch Sterling Reserve B7 in Q4FY27. It also plans to launch a deluxe vodka and a premium Indian whisky in H2FY27.

ABDL Maestro, the luxury portfolio, is expected by management to double revenue to approximately Rs 80 crore in FY27 from about Rs 40 crore in FY26. The luxury business remains in an investment phase, with an indicated three-year gestation period before meaningful profitability.

Capacity Expansion and Margin Outlook

Management retained its mid-teens FY27 revenue-growth guidance, with potential to trend towards the high teens. However, it expects the supply-chain disruption to continue through Q2FY27 before recovery in H2FY27. FY27 EBITDA margin is expected to remain broadly in line with FY26 despite spending on premium brands.

ABDL's approximately Rs 994 crore multi-year capex programme includes investments in Telangana, Maharashtra, Andhra Pradesh and Uttar Pradesh. The programme is intended to deepen backward integration, expand distillation and bottling capacity, improve supply security and reduce outsourcing costs.

• The operational Rangapur PET-bottle facility meets 70–75 per cent of ABDL's requirement.
• The 4 MLPA malt distillery is expected to be commissioned in H1FY27.
• Management targets approximately 300 basis points of EBITDA-margin expansion by FY28 to about 18 per cent, followed by a further 100 basis points in FY29.
• Lower bulk-scotch prices under the India–UK FTA are expected to contribute 70–80 basis points in FY27 and 140–150 basis points from FY28.

ICICI Securities Estimates and Valuation

The estimates imply a 14 per cent FY26–FY28E revenue CAGR. ICICI Securities reduced its FY27E and FY28E PAT estimates by 4.8 per cent and 2.5 per cent, respectively, owing to lower other income and higher depreciation, while leaving revenue and EBITDA estimates unchanged.

The revised Rs 728 target price values ABDL at 42 times FY28E EPS.

Key Risks

• Delayed receipt of approximately Rs 400 crore of dues.
• Higher excise duty or changes in liquor policy.
• Volatility in key input prices.