Radico Khaitan premiumisation momentum lifts margins as P&A growth guidance rises

Investment View and Key Thesis

ICICI Securities’ July 30, 2026 result update retains a BUY recommendation on Radico Khaitan Ltd. and raises the target price to Rs 5,100. The positive view is based on accelerating premiumisation, sustained outperformance of the Prestige & Above (P&A) portfolio, structural margin improvement and an improving balance sheet.

Radico Khaitan is an IMFL manufacturer with eight millionaire brands and annual capacity of 321 million litres.

Q1FY27 Operating Performance

Consolidated Q1FY27 revenue grew 11.8 per cent year-on-year to Rs 1,683.7 crore, with the P&A segment serving as the principal growth driver. P&A volumes increased 35.9 per cent to 5.2 million cases and revenue rose 36 per cent to Rs 970 crore.

Magic Moments Vodka recorded 43 per cent volume growth to 3.25 million cases, supported by flavoured-vodka launches. P&A represented 53.1 per cent of own IMFL volumes, compared with 41.5 per cent in Q1FY26, and 76.8 per cent of IMFL revenue, compared with 66.7 per cent a year earlier.

Management identified vodka as a structural growth opportunity, noting that its share of the Indian spirits market increased to 6.0 per cent from 4.6 per cent over the past year. Other premium and luxury brands, including After Dark, Royal Ranthambore, Rampur and Jaisalmer Gin, also continued to gain traction.

Regular & Others performance was affected by policy changes in Maharashtra and Karnataka and a high base in Q1FY26. Non-IMFL revenue declined because of higher captive consumption and lower bulk alcohol sales.

Margin Expansion and Profitability

Profitability materially exceeded ICICI Securities’ expectations. Gross margin expanded 610 basis points year-on-year to 49.1 per cent. Lower raw-material costs and price increases each contributed about 75 basis points, while favourable premium-product mix contributed about 380 basis points.

EBITDA margin expanded 531 basis points to a record 20.7 per cent, despite around Rs 30 crore of higher packaging-material costs related to the West Asia crisis. Advertising and promotion expenditure increased 110 basis points to 6.9 per cent of IMFL sales.

Adjusted PAT growth was assisted by higher other income and lower interest cost.

Management Guidance and Growth Outlook

Management raised FY27 P&A volume-growth guidance to 25 per cent from 20 per cent and increased EBITDA-margin guidance to 20 per cent from about 18 per cent. The luxury portfolio, which generated around Rs 475 crore of revenue in FY26, is expected to grow around 25 per cent in FY27.

Management expects product mix and pricing to offset input-cost volatility. The India-UK FTA could provide a longer-term benefit through lower Scotch import duties. Advertising and promotion spending is expected to remain at 6–7 per cent of sales, with an emphasis on digital marketing, retail visibility, influencer engagement and on-trade activations.

Earnings Estimates and Valuation

Following the Q1FY27 beat and the upgraded management guidance, ICICI Securities increased its FY27E and FY28E earnings estimates.

The broker values Radico Khaitan at 60 times FY28E EPS of Rs 85.6, resulting in a target price of Rs 5,100.

Balance Sheet and Cash Flow Outlook

Radico Khaitan repaid Rs 138 crore of debt in Q1FY27 and expects to become net-debt-free by Q2FY27. With annual maintenance capex of Rs 150–170 crore and no major capacity expansion planned, ICICI Securities expects healthy free cash flow, improving return ratios and scope for shareholder payouts or value-accretive acquisitions.

Key Risks

• Changes in state liquor policies.
• Volatility in input prices.