Radico Khaitan's stock experienced a sharp rise, climbing 10% during Friday's intra-day trade on the BSE to reach a new high of ₹2,525.50. The increase followed the company's strong operational performance in Q2 of FY25, with investors noting improvements across key metrics.
By 9:42 a.m., Radico Khaitan shares were up 7%, trading at ₹2,445, contrasting with a 0.20% decline in the BSE Sensex. Over 13 trading days since October 8, the share price has surged 27%, signalling strong share market investment interest.
Gross margins improve due to premiumisation and stable costs
Radico Khaitan's gross margin saw a sequential increase of 258 basis points (bps) in Q2 due to continued premiumisation and stabilisation of raw and packaging material costs. However, on a year-on-year (Y-o-Y) basis, gross margins dropped slightly to 43.6% from 44.1% in Q2FY24, primarily due to inflation in foodgrain prices, which impacted the company's cost structure but was offset by the focus on premium Indian-made foreign liquor (IMFL) products.
Growth in premium segments and improved EBITDA margins
In Q2, Radico Khaitan recorded a 12.6% growth in its Prestige & Above beverage category. The company's earnings before interest, taxes, depreciation, and amortisation (EBITDA) margin also saw a notable rise of 150 bps both year-on-year (Y-o-Y) and quarter-on-quarter (Q-o-Q), now reaching 14.5%.
This positive performance in higher-end products contributed to investor interest in share market investment for Radico Khaitan's stock, aligning with market trends favouring premiumisation in the alcoholic beverage sector.
Revenue and profit growth strengthen the financial outlook
Radico Khaitan reported a 20.7% Y-o-Y growth in net revenue from operations, reaching ₹1,116 crore for Q2. Meanwhile, the company's net profit rose 33% Y-o-Y and 7.8% Q-o-Q, reaching ₹82.2 crore. According to management, these results are attributed to the company's operational efficiency and capacity utilisation, notably at its Sitapur distillery, which was commissioned in September 2023. This focus on operational growth is expected to support the company's share market investment appeal.
Stability in raw material costs anticipated for upcoming quarters
Despite the current volatility in grain prices and extra neutral alcohol (ENA) costs, Radico Khaitan's management expects the situation to stabilise by Q3FY25. In a recent statement, the company expressed optimism that the worst of cost pressures may have passed and anticipated possible benefits from future favourable shifts in raw material costs.
The ongoing premiumisation trend, combined with stabilising costs, is expected to contribute to Radico Khaitan's long-term growth within the share market investment sphere.
Market expectations for double-digit growth in premium volume
The company's management has projected continued double-digit premium volume growth for FY25. This growth is supported by the structural drivers within the Indian alcoholic beverage market, including rising consumer affluence, low per capita alcohol consumption, and the shift toward premium brands. With these industry dynamics, Radico Khaitan foresees robust mid-to-long-term demand growth, positioning itself as a potential choice for share market investment.
Radico Khaitan's outlook remains positive amidst share market interest
The management's cautious optimism about grain prices and ENA volatility is paired with a broader positive outlook for FY25, driven by premiumisation and increased distillery capacity. This outlook suggests that Radico Khaitan may remain an attractive option for share market investment as the company leverages ongoing trends in the beverage market, including rising consumer preference for premium products.
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