Radico Khaitan’s (RKL) results for 3QFY2017 were below our estimates both on
top-line as well as bottom-line fronts. The company’s top-line grew by ~4% yoy to
`415cr owing to the impact of demonetization, which led to a decline in
consumer spending. Moreover, lower sales volume and subdued operating
performance led to the de-growth in bottom-line by ~22% yoy to Rs20cr. Going forward, we believe that the company has the
potential to perform better on the bottom-line front on the back of (a) volume
growth, (b) higher sales of premium products, (c) anticipation of better price
hikes, and (d) gradual reduction in debt, which should lead to significant savings
in interest costs. Hence, we recommend an ACCUMULATE rating on the stock
with a target price of Rs147.

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