Allied Blenders: Why Jefferies predicts 28% upside despite stagnant FY27 margin guidance

Jefferies has retained its ‘Buy’ rating on the stock with a target price of Rs 780. This translates to around 28% upside from the current market price. 

According to the brokerage report, sustained growth in ICONiQ White, the revival of legacy brands and benefits from backward integration could support the company’s earnings in the coming years.

Here’s what driving the bullish call – 

ICONiQ White remains the key growth driver

The company’s ICONiQ White whisky brand is at the centre of Jefferies’ growth expectations.

Management expects the brand to maintain more than 20% growth over the medium term and continue gaining market share. Jefferies said, “Management remains confident of sustaining 20%+ growth over the medium term and continuing to gain market share.”

The company is also relaunching three older brands in FY27 – Officer’s Choice, Officer’s Choice Blue and Sterling Reserve B7.

Premiumisation could lift both growth and margins

The second part of the investment case is premiumisation. Allied Blenders is expanding its premium portfolio through new launches in deluxe vodka and premium whisky.

Management expects double-digit volume growth over the medium term, led by mid-to-high teens growth in its Prestige & Above (P&A) portfolio.

Jefferies expects the margin improvement to be more visible in FY28 as backward integration and operating leverage begin to contribute.

The brokerage noted, “After delivering ~650bps of EBITDA margin expansion over FY24-26 through premiumisation, refinancing and cost optimisation, management expects further improvement from a richer product mix, continued premiumisation and the benefits of backward integration.”

Backward integration could become the next margin lever

Allied Blenders is spending heavily to gain more control over parts of its supply chain. Of the total announced capital expenditure (capex) of Rs 1,500 crore, around Rs 5 billion has already been incurred. Investments are going into Extra Neutral Alcohol (ENA), malt maturation, bottling and other backward-integration projects.

Jefferies said, “Investments across ENA, malt maturation, bottling and backward integration projects are aimed at enhancing supply security, improving quality control and driving structural profitability.”

The company’s balance sheet also remains relatively comfortable, with net debt-to-EBITDA below 2 times.

Can the India-UK FTA help further?

Jefferies expects the India-United Kingdom Free Trade Agreement (FTA) to gradually reduce procurement costs for Scotch, which could provide some additional support to margins.

The brokerage also sees a more favourable regulatory environment in some states, including Karnataka, while Allied Blenders has reduced its dependence on Telangana from more than 30% of its business to around 25% over the past two years.

What investors need to watch

The biggest near-term focus will be whether ICONiQ White can sustain its growth and whether the legacy-brand relaunches begin contributing meaningfully.

Jefferies expects FY27 margin expansion to remain limited, with a more meaningful improvement in FY28 as backward integration, operating leverage and a better product mix start showing up in earnings.

Disclaimer: This article is based on research reports from one or more brokerage firms and is for informational purposes only. The views, target prices, and recommendations expressed are those of the respective brokerage firms and do not reflect the official policy or position of Financial Express. This should not be construed as an offer, solicitation, or recommendation to buy or sell securities. Investors must conduct their own independent due diligence and seek advice from a SEBI-registered financial advisor before making any investment decisions.