Alco-bev premiumisation intact in Q3; Radico top pick for JM Financial

Among key trends, spirits companies such as Radico Khaitan Ltd. and United Spirits Ltd. continued to outperform beer major United Breweries Ltd. on volumes, JM Financial said

Premiumisation trends in the alcoholic beverages sector remained strong in the third quarter of financial year 2026 (Q3-FY26), while margin performance positively surprised, according to JM Financial Institutional Securities.

 

The brokerage said its alcoholic beverage coverage posted around 8 per cent year-on-year (Y-o-Y) sales growth in the quarter, compared with 11 per cent in the preceding quarter. However, Ebitda growth came in stronger at 21 per cent Y-o-Y versus 16 per cent in the second quarter, beating estimates.

 

Revenue growth moderated sequentially, partly due to the Andhra Pradesh route-to-market change coming into the base for spirits players.

 

Among key trends, spirits companies such as Radico Khaitan Ltd. and United Spirits Ltd. continued to outperform beer major United Breweries Ltd. on volumes. An extended monsoon and regulatory headwinds in key markets impacted beer consumption, JM Financial said. 

 

Premiumisation remained robust across both spirits and beer segments. Radico Khaitan’s and Allied Blenders and Distillers' P&A segment grew 29 per cent and 15 per cent Y-o-Y, respectively, with strong volume growth. United Spirits posted 8.3 per cent growth, aided by improved realisations and a favourable product mix. United Breweries also reported double-digit growth in its premium portfolio, the brokerage said. 

 

Gross margins expanded 220 to 350 basis points (bps) Y-o-Y across players, exceeding forecasts. United Breweries, which had faced margin pressure in previous quarters, reported healthy expansion driven by price hikes and a better product mix.

 

Post third-quarter results, consensus earnings estimates for spirits players remain largely unchanged for FY27 and FY28, while United Breweries’ earnings estimates have been cut by around 5 per cent.

 

Looking ahead to the fourth quarter, JM Financial expects Radico Khaitan to outperform with sales growth in the teens. Allied Blenders and Distillers is likely to return to low double-digit growth, supported by normalisation in Telangana and entry into the brandy segment in Andhra Pradesh. United Spirits and United Breweries are expected to post 6-7 per cent Y-o-Y sales growth.

 

For FY27, the brokerage expects high single-digit to low double-digit sales growth and around 20 per cent Ebitda growth across its alcohol beverage coverage. Sustained double-digit growth in P&A portfolios will be key for spirits players, while summer season volumes will be critical for United Breweries, where the Street is building in double-digit sales growth expectations. JM Financial said Radico Khaitan remains its preferred pick in the sector.

 

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