Up 200% in 3 years, 700% in 5 years! ICICI Sec sees another 19% upside in this liquor stock. Do you own it?

Radico Khaitan, one of the most recognized IMFL (Indian Made Foreign Liquor) brands in India, saw its share price jump 4% in intraday trade on Monday, May 5, reaching ₹2,545 apiece after domestic brokerage firm ICICI Securities initiated coverage on the stock with a ‘buy’ rating and a target price of ₹2,900 apiece. This implies an upside potential of around 19% from the stock’s previous closing price.

The stock has already delivered a stellar run in recent years, gaining nearly 200% in the last three years, 700% over the last five years, and over 2,000% in the past decade, driven by a steady rise in demand for premium and luxury alcohol brands.

Why ICICI Securities sees more upside despite the stock’s strong run

Despite the stellar rise in Radico Khaitan’s stock price, ICICI Securities remains optimistic, citing the steady increase in demand for white spirits—a segment where Radico holds strong leadership.

The company commands a 60% market share in the vodka segment and a 50% share in the luxury gin category. The brokerage expects strong double-digit growth in white spirits, especially in premium offerings, driven by rising preference among younger consumers and the versatility of white spirits for cocktail-based, on-trade consumption.

In addition, the company is expanding its whisky portfolio with the launch of Indian single malt offerings. Over the past decade, Radico has launched several successful products in this segment.

It has also revamped existing brands like 8PM Premium Black and After Dark in the lower and mid-prestige segments with modern packaging, driving strong growth over the past two years.

Over the past 15 years, Radico has built a strong premium portfolio, supported by consumer demand and around 25 new brand launches. Its performance in the P&A (Prestige and Above) segment has driven a 13% volume CAGR over FY19–24, compared to a 3% volume decline in the regular segment, as per the brokerage.

Volume contribution from P&A brands to increase from 39% to 48% over FY24-27E

ICICI Securities expects Radico Khaitan’s margin improvement trajectory to continue, projecting a 200 basis point (bps) margin expansion between FY25 and FY27. Over FY22–24, margins were under pressure due to steep inflation in Extra Neutral Alcohol (ENA) and glass prices.

However, in the first nine months of FY25, the company saw a 130 bps year-on-year margin recovery—driven by premiumization, easing glass-price inflation, and price hikes in key states.

Looking ahead, the growing focus on launching new products in the P&A segment is expected to further increase its contribution. This will be aided by Radico expanding into more profitable, P&A brand-heavy states. The contribution from P&A brands is projected to increase to 48% in volume and 78% in value by FY27E.

Furthermore, the company’s investment in backward integration is expected to support long-term margin expansion. ICICI Securities expects return ratios to improve, with RoE and RoCE rising from 11% and 10%, respectively, to 20% and 18% over FY24–27E.

Execution in white spaces, premiumization to sustain valuations

The brokerage remains optimistic about Radico Khaitan’s execution capabilities and its ability to identify and launch successful brands in untapped (“white space”) segments—justifying its premium valuation.

ICICI Securities projects revenue and earnings CAGRs of 15% and 39%, respectively, supported by 15% volume growth in the P&A segment and 4% in the popular segment.

The growing contribution of P&A brands (currently at 39% of volume in FY24) and declining commodity prices are expected to improve operating margins by 220 bps, reaching 16.3% by FY27E.

Strong execution, premiumization, and improving operating metrics are expected to help the company maintain its premium valuation in the coming years.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.