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Radico Khaitan Ltd

| Q4 FY26 Earnings Conference Call

BULLISH SENTIMENT

Report Source

⬤12th May 26

Summary : Radico Khaitan delivered record FY26 results driven by premiumization, with strong confidence in FY27 margin expansion and luxury portfolio growth despite external uncertainties.

Management Perspective positive : FY2026 has been an important year, an inflection point. The business delivered a strong performance. We remain confident about Radico Khaitan's long-term growth opportunity. We are quite confident to add 120 basis points to 125 basis points margins in the coming year '27. The current environment reinforces the strength and resilience of Radico Khaitan's business model.

Concall Report Analysis & Insights

Business Overview

  1. FY2026 was an inflection point with net revenue exceeding INR 6,000 crores and EBITDA crossing INR 1,000 crores.
  2. Prestige & Above segment continues to lead growth, with luxury portfolio sales reaching INR 475 crores.
  3. New luxury brands like Rampur 1943 Virasat and The Spirit of Kashmyr are gaining strong traction.
  4. Magic Moments Vodka achieved 21% volume growth, reaching 8.6 million cases and INR 1,500 crores in sales.
  5. After Dark Whisky recorded over 60% growth, crossing 3.1 million cases during the year.

Future Growth Prospects

  1. Expect 25% value growth in luxury portfolio for FY27.
  2. Targeting 20% volume growth for Prestige & Above portfolio in FY27.
  3. EBITDA margin expected to expand by 125 basis points for FY27.
  4. Focus on scaling on-trade presence, distribution, and key account partnerships.
  5. Planning new Magic Moments flavors and a Tequila launch in D'YAVOL Spirits.

Management Insights

  1. Disciplined execution, richer portfolio mix, and value-led growth drove strong performance.
  2. Investments in premium and luxury portfolio are yielding strong margin performance.
  3. Balance sheet remains strong, aiming to be debt-free in H1 FY27.
  4. Committed to shareholder value with a minimum 20% dividend payout policy.
  5. Confident in long-term growth opportunity, focusing on innovation and brand equity.

Signs of Skepticism

  1. Uncertainty about the full impact of global geopolitical situations on costs and supply.
  2. Reliance on outsourced bottling capacity (60-65%) could pose supply chain hiccups.
  3. Market share in Maharashtra is low (3-4%) despite new MML JV launch.
  4. Management cannot predict if the global situation worsens drastically.

Risk Factors

  1. Global environment, especially West Asia developments, could impact supply chain and input costs.
  2. Regular volume degrowth due to higher base and policy changes in Maharashtra and Karnataka.
  3. Recent 15% inflation in glass prices, though factored into costing.
  4. Uncertainty regarding state excise policy changes in West Bengal and Bihar.

Good To Know

  1. Net debt reduced by INR 329 crores during the year.
  2. Gross margin expanded by 450 basis points year-on-year to 48% in Q4 FY26.
  3. EBITDA margin reached 19% in Q4 FY26, expanding 565 basis points year-on-year.
  4. The company is self-sufficient in power and fuel, primarily biofuel-driven.
  5. Top three states for sales are Uttar Pradesh, Andhra Pradesh, and Rajasthan.

Key Drivers

  1. Premiumization strategy drives strong growth.
  2. EBITDA margin expansion expected in FY27.
  3. Luxury portfolio targets 25% value growth.
  4. Debt-free status by H1 FY27.

Key Analyst Discussions

Competitive Environment

  1. Radico Khaitan is No.1 in UP IMFL market share.
  2. Aiming for 10% market share in the MML category in Maharashtra.
  3. Karnataka's rationalized pricing benefited premium brands, increasing saliency.

Market Trends & Consumer Behavior

  1. GenZ consumers prefer white spirits, driving innovation in vodka flavors.
  2. Premiumization is a key trend, with consumers opting for finer products.
  3. No current plans to enter low-alcoholic or RTD segments.

Financial Highlights

  1. Management expects 120-125 basis points EBITDA margin expansion for FY27.
  2. Price increases in some states contribute to margin improvement.
  3. Non-IMFL business has a margin of around 9% for the full year.
  4. Capex for FY27 is INR 150-175 crores, mainly for internal capacity optimization.
  5. The 125 bps margin expansion includes potential UK-India FTA benefits.

Product Composition

  1. New luxury launches like Virasat and Kashmyr are expanding nationally.
  2. Magic Moments flavors (Jamun, Mango, Thandai) are being taken nationally.
  3. 8PM Black repackaging contributed to 60% growth in Q4.
  4. Luxury portfolio brands include Rampur, Jaisalmer, Royal Ranthambore, and Sangam.

Strategic Considerations

  1. Expanding on-trade presence with 1,000 advocacy sessions planned.
  2. International market is strategic, targeting 100 airports for global travel retail.
  3. Outsourced bottling (60-65%) is managed with quality tie-ups.
  4. Karnataka policy changes are progressive, benefiting premium brands.
  5. Bihar prohibition uplift would benefit the company due to past large consumer base.