Radico Khaitan

Maker of Indian Made Foreign Liquor (IMFL), its raw material cost, which is molasses continues to remain high. In Q3FY15, the cost rose 4% (YoY) and rise in net sales was 5% a Rs.399 crore. This led to the EBITDA come down from Rs.54 crore to Rs.46 crore and margin fell from 14.25% to 11.53%. The company’s Profit Before Tax (PBT) fell 22% at Rs.24 crore and then it managed to reduce tax by a huge 67% at Rs.3 crore from Rs.9 crore and this helped the company end the quarter with a flat net profit of Rs.21 crore.

The company’s net debt is around Rs.875 crore and interest outgo is quote substantial at Rs.23 crore v/s Rs.22 crore. In fact its outgo for 9MFY15 was at Rs.69 crore. Hopefully, with rates coming down, this burden will also reduce in coming days.  The company is expected to have an EPS of over Rs.6 for FY 16, with Enterprise Value of Rs.2,000 crores. It is seen as one of the most undervalued breweries stock and can move to Rs.125 in next three months. The advice is to buy as an investor.