Radico Khaitan premium portfolio momentum lifts FY27 growth and margin guidance

Investment View and Valuation

Motilal Oswal Financial Services reiterated its Buy rating on Radico Khaitan in its July 29, 2026 1QFY27 results update. The broker remains positive on the company’s strong Prestige and Above (P&A) volume trajectory, strategic expansion in premium and luxury portfolios, operating leverage and broad-based geographic expansion.

Motilal Oswal considers Radico Khaitan’s rich valuation justified by continued strong execution and earnings growth. It values the company at 60 times March 2028E EPS to derive a target price of Rs 5,000, compared with the current market price of Rs 4,374.

1QFY27 Operating Performance

Standalone net sales grew 12% year-on-year to Rs 1,680 crore in 1QFY27, marginally below Motilal Oswal’s estimate of Rs 1,720 crore. P&A volumes rose 36% year-on-year to 5.2 million cases, ahead of the broker’s estimate of 4.6 million cases. P&A value growth was also 36%.

Overall Indian-made foreign liquor (IMFL) volumes increased 3% year-on-year to approximately 10 million cases, below the broker’s 9% growth estimate. This was due to a 15% decline in regular portfolio volumes to approximately 4.6 million cases. The regular portfolio faced a high base following Andhra Pradesh route-to-market changes in 1QFY26 and policy changes in Karnataka and Maharashtra. Royalty cases declined 63% year-on-year to 0.2 million cases.

IMFL revenue nevertheless grew 18%, led by premium brands. Non-IMFL revenue declined 3% because of higher captive consumption and lower bulk alcohol sales.

Margin Expansion and Profitability

Profitability materially exceeded expectations. Gross margin expanded by 610 basis points year-on-year and 110 basis points quarter-on-quarter to 49.1%, its highest level in 21 quarters. Favourable raw-material costs and pricing each contributed 75 basis points, alongside premiumisation. These benefits were partly offset by approximately Rs 30 crore of higher packaging costs caused by price volatility.

EBITDA grew 50% year-on-year to Rs 349 crore, above Motilal Oswal’s expectation of 38% growth. EBITDA margin expanded by 530 basis points to an all-time high of 20.7%. PBT and adjusted PAT grew 63% and 61% year-on-year, respectively. Interest cost declined 27% year-on-year as debt reduced.

Management Guidance and Business Developments

Management raised FY27 P&A volume-growth guidance to more than 25% from 20% earlier and upgraded FY27 EBITDA-margin guidance to 20% from 18.5%. Advertising and sales-promotion spending is expected to remain around 6–8% of IMFL revenue, compared with 6.9% in 1QFY27.

• Karnataka’s excise policy was described as favourable for premium brands. Radico Khaitan’s P&A volumes rose 83% in the quarter, compared with 9% industry growth.
• Maharashtra MML volumes have stabilised at 0.6–0.7 million cases.
• The RNVDML joint venture has a 7–8% market share and targets 10–15% over the medium term.
• Magic Moments sold 3.25 million cases, with volume growth of 43% and value growth of 51%. Management attributed this performance to consumer demand rather than channel loading.
• Management expects the India-UK FTA to reduce retail prices by 7–8% and limit competitive impact.
• Annual maintenance capex is expected at Rs 150–170 crore.

Earnings Estimates and Financial Outlook

Motilal Oswal models FY27 and FY28 EBITDA margins of 19.9% and 20.6%, respectively. It raised its FY27 and FY28 EPS estimates by 11% and 8%, respectively, following the volume momentum and margin beat.

The broker forecasts approximately 34% EPS CAGR over FY26–FY28E, with FY27E RoE and RoIC of 23% and 26%, respectively.

Balance Sheet and Key Monitorables

Net debt declined by Rs 138 crore from March 2026 to Rs 106 crore in June 2026. Management is targeting a net debt-free balance sheet by 2QFY27.

Key factors to monitor include sustaining P&A growth, premiumisation, packaging-cost volatility, the impact of state policies on regular brands, bulk alcohol demand and the delivery of margin expansion despite external volatility.