Jefferies starts coverage on spirit stocks; Radico, United Spirits top bets

Jefferies has a target price of ₹2,800 per share for Radico Khaitan, ₹1,315 for United Spirits, and ₹620 for Allied Blenders

Global brokerage Jefferies has initiated coverage on Indian alcoholic beverages with a Buy on United Spirits, Radico Khaitan, and Allied Blenders. The spirits category offers premiumization-led strong growth potential, with double-digit top-line compound annual growth rate (CAGR) across companies and a meaningful room to expand margins, the brokerage said in a recent note. 

 

Radico Khaitan stands out as Jefferies' top pick, as it expects the company to lead growth with a 35 per cent EPS CAGR (highest) over FY25–28E, along with improving RoCEs justifying its premium valuations. Despite near-term pressure from a Maharashtra tax hike, United Spirits offers a favourable risk-reward after a 20 per cent stock correction, with a 13 per cent EPS CAGR forecast. It sees Allied Blenders as a dark horse in the sector, with signs of a turnaround.

 

Jefferies has a target price of ₹3,590 per share for Radico, indicating an upside potential of 20 per cent from the stock's closing price on September 15, 2025. For United Spirits, the brokerage set a target price of ₹1,570 per share, and for Allied Blenders, a target price of ₹620 per share, signalling an upside of 19 per cent and 10 per cent, respectively.

 

In the last two sessions, shares of Radico Khaitan, United Spirits, and Allied Blenders have gained 5.2 per cent, 1.2 per cent, and 3.4 per cent, respectively.

Here's why Jefferies is bullish on the Indian spirits industry:

According to Jefferies, Indian spirits is a large market with high entry barriers due to complex state-level regulations, creating a strong competitive edge for established players. While overall industry growth is moderate, the premium segment, particularly Prestige & above (P&A) products, is growing in double digits, with scotch and white spirits leading at a 15–20 per cent CAGR.

 

Additionally, the regulatory environment has improved across several states, with instances of even reduction in taxation for premium products and privatisation of retail trade. However, the recent tax hike in Maharashtra was a step backwards.  Track Stock Market LIVE Updates

Local expanding franchise

Indian companies like Radico Khaitan have recorded solid growth in the last few years, benefiting from the presence of fast-growing segments like Vodka and Indian Single Malts. The companies are likely to drive industry-leading growth in the medium term by ramping up new launches, especially in the under-represented P&A segment. 

Double-digit top-line growth

India's spirits sector offers an attractive growth profile compared to traditional FMCG, driven by strong premiumisation trends. All three companies are expected to post double-digit revenue growth, led by gains in the P&A segment. Growth would be the strongest for Radico with an 18 per cent CAGR, followed by Allied at 12 per cent and United Spirits at 10 per cent.

Improving margin outlook

Unlike FMCG, spirit margins are below their peaks, adjusted for change in mix. Analysts at Jefferies expect meaningful margin expansion as inflation stabilises and premiumisation accelerates, alongside a potential cut in scotch import duties post the India-UK FTA—margins are expected to improve. 

 

"Margin uplift would be higher for Indian companies given their low base vs United Spirits, where Diageo brands are capped at 10 per cent. This would enable higher Ebitda growth (20 per cent + CAGR for Radico/ Allied; 13 per cent CAGR for United Spirits). While spirits offer a better growth profile, valuations are fairly similar to FMCG and should sustain," the brokerage said in a note.