Market Price Rs 90 (FV 2) Analyst : Janak Shah (M.B.A. Finance)
Market Cap Rs 1197 crs Date: 5th August 2016
Target : Rs 120
About the Company:
The company is promoted by the Khaitan family. It is run by Dr Lalit Khaitan and Mr Abhishek Khaitan. The attractive part about this stock is that it is available at the bottom valuation as compared to the general market with is at an high. We believe that bottom fishing in a good company at such attractive levels is a good idea. It is the number 2 listed player after United Spirits. In India United Spirits share is 53% followed by Radico Khaitan at 12%, Jagatjit at 9% and Tilaknagar at 4%. After the deal of USL and Dieggo , the fact remains that Radico Khaitan is available at very attractive valuations.
The company has a wide range of alcoholic products. In Whisky, the company has 8 PM, After dark, Eagles dare and Whytehall and in Brandy, the company has Morpheus and Old Admiral in Rum and Vodka and Gin are under the brand name of Magic Moments which is very successful and the Remix version that is the flavoured version which comes in green apple, orange etc has also found huge interest and success.
It has presence in North East and has 45000 retail outlets, 5000 bars and 18 brands work in the Canteen Store department (CSD) which also contribute to huge sales.
The company has been posting fairly consistent results. For the year, March 2014, the company posted sales of 1451 crs and the net profit was in the region of 71 crs and the EPS stood at Rs 5.36 per share. For year March 2015 the sales were Rs 1488 crores and the Net profit was 67.5 crores. For year March 2016 , the sales was at Rs 1543 crores and the Net Profit is at Rs 77 crores. This year that is March 2017, we see Net profit jump to 90 crore levels. The company pays 80 paise dividend.
The promoter holding stands at 40.46% and Fii’s hold 20% and Dii’s hold 9.9% and rest of 29.48% is with Indian public.
Comparisions to Peers:
Apart from Radico Khaitan which is the second biggest in terms of sales, the biggest company is the UB group companies United Spirit and United Breweries. Also Tilaknagar has good presence. United spirit is quoted at a huge PE but we are bullish on United Spirits too , and Radico Khaitan is at a 15 forward PE. Even though United Spirit is right now quoted at huge PE and as it’s a multinational, earnings will now catch up. Even that can be bought at current levels
There are only a handful of listed companies with good track record. As the average age of an Indian is only 30, the consumption of Alcohol will increase and all the breweries will benefit.
The Alcohol industry is subject to taxation from budget and government policies which change from time to time.
Price Targets:The current rate of Rs 90 per share is tipped to touch 100 in the medium term and the company can also touch 120 levels in next 1 year.
( Disclosure: The analyst has no holdings in the company as on date of issue being published)
The analyst is a sebi certified research analyst. Registration No: INH000001717