Radico Khaitan (Q4 FY14)

Radico reported 6% yoy rise in sales though prestige and above brands continued their upward march, growing at 17.2% yoy in Q4 and 20.7% in FY14.

Jun 03, 2014 12:06 IST India Infoline News Service

CMP Rs105, Target Rs110, Upside 4.8% 

  • Radico reported a robust 17.2% yoy rise in its prestige and above brands volumes; net sales up 6.8% yoy   

  • EBIDTA margin impacted by high selling and other expenses even as ENA costs continued to rise through the year

  • Reported profit dragged lower by higher interest and taxes offset somewhat by higher other income

  • Margin headwinds remain a concern; revise lower FY15/16 forecasts and retain Market Performer

Result table
(Rs m) Q4 FY14 Q4 FY13 % yoy FY14 % yoy
Net sales 3,427 3,208 6.8 14,122 16.0
Other op income 87 107 (18.6) 395 (3.9)
Total sales 3,514 3,315 6.0 14,517 15.4
Adj. raw materials (1,335) (1,396) (4.4) (6,311) 20.6
Purchase of traded goods (23) (213) (89.3) (220) (64.3)
Staff costs (237) (201) 17.9 (932) 18.4
Selling & Distribution (706) (575) 22.9 (2,862) 22.0
Other expenditure (805) (537) 49.8 (2,257) 28.4
Operating profit 408 393 3.8 1,935 5.0
OPM (%) 11.6 11.9 (25) bps 13.3 (131) bps
Depreciation (98) (88) 10.7 (388) 9.7
Interest (224) (182) 22.8 (848) 21.1
Other income 101 74 36.8 365 20.0
PBT 188 197 (4.5) 1,064 (2.6)
Tax (89) (40) 123.3 (352) 9.8
PAT 99 157 (37.0) 713 (7.8)
PAT margin (%) 1.4 2.4 (96) bps 2.4 (79) bps
Source: Company, India Infoline Research

Premium brands continue their upward trajectory

Radico reported 6% yoy rise in sales though prestige and above brands continued their upward march, growing at 17.2% yoy in Q4 and 20.7% in FY14. The share of prestige and above brands in overall portfolio increased to 17.3%/18.3% in Q4/FY14 which augurs well in the medium term from a margin perspective.

EBIDTA margin in Q4 were impacted by rise in selling and other expenses even as ENA prices continued to rise during the year due to strong demand for molasses across user industries. However, as capacity for grain based molasses rises, this could ease pricing pressure in the medium term. PAT declined 37% yoy on higher tax rate and interest cost though moderated to some extent by higher other income. 


Prestige and above brands rose 17% yoy in Q4
Vols (mn cases) Q4 FY14 Q4 FY13 % yoy FY14 FY13 % yoy
Prestige & above brands 0.8 0.7 17.2 3.7 3.1 20.7
Regular & others 3.9 3.9 1.0 16.6 15.9 4.5
Total 4.7 4.6 3.5 20.4 19.0 7.1
Prestige & Above brands % of total 17.3 15.3 203 18.3 16.2 205
Source: Company, India Infoline Research

Retain Market Performer on margin challenge

Sustained higher selling costs are likely to eat in to benefit provided by rising share of premium brands in the overall portfolio; moreover, ENA costs are also expected to remain elevated. We expect prestige and above brands to maintain their robust growth and based on FY14 results, we revise lower our FY15/16 estimates primarily to reflect headwinds to margin and retain our Market Performer rating on the stock with revised 9-12mth target of Rs110.


Financial summary
Y/e 31 March  (Rs m) FY13 FY14E FY15E FY16E
Revenues 12,584 14,517 15,897 17,677
yoy growth (%) 10.0 15.4 9.5 11.2
Operating profit 1,842 1,935 2,194 2,439
OPM (%) 14.6 13.3 13.8 13.8
Reported PAT 773 713 869 1,004
yoy growth (%) 21.4 (7.8) 22.0 15.5
EPS (Rs) 5.8 5.4 6.6 7.6
P/E (x) 18.0 19.5 16.0 13.9
P/BV (x) 1.9 1.8 1.6 1.5
EV/EBITDA (x) 11.4 11.4 10.1 9.3
Debt/Equity (x) 1.0 1.0 1.0 0.9
ROE (%) 10.9 9.4 10.5 11.1
ROCE (%) 12.5 12.1 12.8 13.3
Source: Company, India Infoline Research

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