Indian stock markets are on a continuous upmove since January this year with consumer-facing stocks leading the charge. If we look at liquor makers, this year has been a mixed-bag for them. Earlier this year, almost all liquor stocks tumbled heavily after Supreme Court ruling which restricted the sale of liquor within a 500 meters distance from the edge of the national and state highways. These stocks later recovered after several clarifications from the apex court. As people’s drinking habits evolve and social drinking grows in India, some of these liquor companies have great prospects. We bring to you one such stock which could be bought for less than the price of a bottle of Old Monk and may double your money.
Radico Khaitan – Edelweiss
Shares of Radico Khaitan have returned over 90% in a nearly nine-and-half-month period of 2017 so far. The key equity indices — Sensex and Nifty — have returned in a range of 22-24% in the corresponding term. Radico Khaitan is the third largest listed alcoholic beverage company after United Spirits and United Breweries. The market capitalisation of Radico Khaitan stood at Rs 2,869.25 crore as per Thursday’s close of Rs 215.5 while United Spirits and United Breweries market capitalisation was at Rs 35,677.96 crore and Rs 21,977.36 crore respectively.
The research and brokerage firm Edelweiss has given a target price of Rs 350 which implies a return of 103% from an entry price of Rs 172 provided by the Edelweiss. “Radico Khaitan has been in a long consolidation since 2007. Currently, the stock has broken out of the consolidation triangle and gained momentum, similarly, MACD is also hinting a resumption of a bullish trend. We could see the stock touch 350 in the next 18 months,” according to Edelweiss.
The spirits market size in India was 285 mcs in FY16 and is expected to reach 337 mcs by FY20, Edelweiss said in a report. During FY16-20E, IMFL sales value is expected to grow at a CAGR 6.3% and sales volume at 4%, Edelweiss added. In FY16, the industry volume declined by 1.7%; however, value growth was 0.7%.
“India’s liquor market tends to have a better consolidation in higher-end (value) space (top 10 players make up over 70% of market share in premium and super premium segments) while it’s more fragmented at the lower-end (value) (top 10 players only make up 17-18% of economy and low mid-range segments. Radico Khaitan’s strong brand image and heritage have enabled market share gains in the premium/super premium space,” Edelweiss said in a report.
Radico Khaitan is one of the largest players in the Indian Spirits industry, it was formerly known as Rampur Distillery which was established in 1943. Dr Lalit Khaitan along with his father bought Rampur Distillery in 1972 to run it as a bottler for other’s spirits, as a part of their family business, according to company’s website. Today, Radico Khaitan operates three distilleries and one JV with a total capacity of 150 million litres with 33 bottling units spread across the country.