Why did Systematix initiate coverage on Radico Khaitan? 16% upside seen

Radico Khaitan is entering a phase of strong operating leverage, with margin expansion, healthy cash flows, and a visible path to debt reduction by FY27

Radico Khaitan share: Domestic brokerage Systematix Institutional Equities has initiated coverage on Radico Khaitan stock, an alcoholic beverage company, with a 'Buy' rating, saying the company has successfully transitioned from a volume-driven liquor player into a brand-led premiumisation story underpinned by its deep backward integration in ENA, diversified portfolio spanning multiple categories, and consistent innovation in underpenetrated white spaces.

 

According to Systematix, Radico Khaitan is well-positioned to benefit from the structural shift in consumer demand toward premium spirits, driven by its eight millionaire brands, growing presence in key states, expanding international reach, and increasing share of prestige and above (P&A) brands.

 

On a financial basis, the company is entering a phase of strong operating leverage, with margin expansion, healthy cash flows, and a visible path to debt reduction by FY27. Radico Khaitan is expected to deliver a CAGR of 17.6 per cent in revenue, 25.8 per cent in EBITDA, and 37.1 per cent in adjusted PAT over FY25–FY28E, the brokerage said.

 

Systematix values the company at 58x Sep 2027E EPS and arrives at a target price of ₹3,473. The target implies a 16 per cent upside from Wednesday's closing price of ₹2,982.7. 

 

At 11:15 AM, the Radico Khaitan stock was trading at ₹2,960, down 0.75 per cent on the NSE. In the last two sessions, the stock has slipped around 1 per cent. The stock's 52-week high was at ₹3,067 and 52-week low was at ₹1,845.5 on the NSE. The company's total market capitalisation stood at ₹39,641.14 crore.  READ STOCK MARKET UPDATES LIVE

Here's why Systematix holds a positive outlook on Radico Khaitan:

Premiumisation and integration strengthen long-term growth: Radico Khaitan's backward integration into grain-based ENA ensures quality control, supply stability, and long-term raw material security. With ENA capacity expanding to 321 million litres in FY24, the company aims for sustained growth over the next 6–7 years. Despite funding this capex through debt, net debt stood at ₹4.1 billion as of June 2025 and is expected to reduce significantly, with the company on track to become nearly debt-free by FY27. 

 

Meanwhile, its premiumisation push continues, with the share of P&A brands rising from 24 per cent/41 per cent of IMFL volumes/value in FY16 to 41 per cent/69 per cent in FY25, and projected to reach 50 per cent/74 per cent by FY28. Magic Moments' share has reduced to 54 per cent of P&A volumes, with growing traction in whisky, gin, and malt, supported by a retail presence across 100,000+ outlets.

 

Diverse portfolio: Radico Khaitan operates a broad portfolio spanning mass to luxury segments, from 8PM whiskey to Rampur Single Malt and Royal Ranthambore. The company leads vodka with over 60 per cent market share, while Jaisalmer gin dominates luxury gin, and Morpheus brandy holds 64 per cent of the super-premium brandy segment. The company's semi-luxury and luxury brands generated ₹3.4 billion in FY25 (10 per cent of revenue) and are expected to surpass ₹5 billion in FY26E.  ALSO READ | Niva Bupa newly rated 'Add' at JM Financial; 10% upside potential seen 

Expanding beyond core markets: The company maintains a strong foothold in its core market of Uttar Pradesh while steadily growing its presence in key states like Andhra Pradesh, Karnataka, Telangana, and West Bengal. Its global footprint is also expanding, with exports to over 100 countries now contributing 9 per cent to its revenue. Additionally, the CSD channel accounts for 11–12 per cent of revenue, supporting the growth of its premium product portfolio.

 

Robust growth with margin improvement ahead: Radico Khaitan reported a strong FY25, driven by rising IMFL and P&A volumes, improved margins, and premiumisation. Ebitda margin rose to 13.9 per cent on the back of a better product mix, cost efficiencies, and selective price hikes. The company is expected to see further revenue growth and a 300 bps margin expansion by FY28, supported by falling input costs, increased P&A share, and operational gains.