RADICO KHAITAN LTD Detailed Report -...
Transcript of RADICO KHAITAN LTD Detailed Report -...
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May 5th, 2010
Stock Data
Sector Breweries & Distilleries
Face Value(Rs) Rs.2.00
52 wk. High/Low (Rs.) Rs.136.50/62.50
Volume (2 wk. Avg.) 94000
BSE Code 532497
Market Cap(Rs in Mn) 12902.03
Financials (Rs in Mn) FY08 FY09 FY10E FY11E
Net Sales 8094.12 6960.29 8557.45 9584.34
EBIDTA 952.96 806.35 1429.92 1616.01
PAT 330.71 65.36 447.70 545.30
EPS 3.23 0.64 4.35 5.30
P/E 33.85 196.74 28.82 23.66
RADICO KHAITAN LTD
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SYNOPSIS Radico Khaitan (RKL) is one of India's oldest and largest liquor manufacturers. Formerly known as Rampur Distillery which was established in 1943. The Company’s manufacturing plants are located at Uttar Pradesh, Rajasthan, Andhra Pradesh, Uttaranchal and Haryana. The company entered into 50:50 joint ventures with Diageo Radico Distilleries to market Masterstroke Whisky. The company has more than 35,000 shareholders. It is the most profitable company in the domestic liquor industry. The company has presence in 30 countries and offers a unique 5cl Sachet pack for greater market penetration. The company owns largest distilleries in Asia and produces Extra Neutral Alcohol from molasses and grains. It is the largest exporter of Extra Neutral Alcohol from India. RKL has set up a second grain-based distillery in Aurangabad, Maharashtra with an investment of Rs136 crore. The Company plans to capture significant volumes into the high liquor consuming markets like Kerala, Tamil Nadu, and Andhra Pradesh and increase its market share in other existing markets The Company aims to achieve sales volume of more than 20 million cases per year in next 2 years. Net Sales and PAT of the company are expected to grow at a CAGR of 6% and 18% over 2008 to 2011E respectively.
1 Year Comparative Graph
RADICO KHAITAN LTD BSE SENSEX
V.S.R. Sastry
Equity Research Desk
Dr. V.V.L.N. Sastry Ph.D.
Chief Research Officer
C.M.P: Target Price: Rs.125.50 Rs.144.00
Share Holding Pattern
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Peer Group Comparison
Name of the company CMP(Rs.)
Market Cap.(Rs.Mn.) EPS(Rs.) P/E(x) P/BV(x) Dividend (%)
Radico Khaitan 125.50 12902.03 0.64 196.74 5.81 15.00
United Spirits 1258.00 15780.93 31.92 39.36 4.47 20.00
United Brew 203.50 4884.98 4.22 48.22 5.85 30.00
Empee Dist 119.50 227.35 - - 0.97 50.00
Investment Highlights
Q3 FY10 Results Update
RADICO KHAITAN LTD disclosed results for the quarter ended December 2009. Net
sales for the quarter moved up 34.24% to Rs.2378.13 million as compared to Rs.
1771.51 million during the corresponding quarter last year. During the quarter,
PAT is increased to Rs.115.25 million from Rs. (68.04) million in previous year
same quarter. The Basic EPS of the company stood at Rs.1.12 for the quarter
ended December 2009.
Quarterly Results - Standalone (Rs in mn)
As At Dec-09 Dec-08 %Change
Net sales 2378.13 1771.51 34.24%
PAT 115.25 (68.04) 269%
Basic EPS 1.12 (0.66) 269%
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Allotment of Equity Shares
Radico Khaitan Ltd has allotted 62939 equity shares of Rs 2/- each to the eligible
employees on exercise of stock options under the Employees Stock Option Scheme
2006 (ESOP) of the Company. The paid up Equity Share Capital of the Company
post allotment is 13,18,93,464 Equity Shares of Rs 2/- each aggregating Rs.
26,37,86,928/-.
Radico Khaitan allots 2,89,19,000 equity shares to QIB
Radico Khaitan has approved the allotment of 2,89,19,000 equity shares of Rs 2
each at a price of Rs 118.19 per equity share, which includes a premium of Rs
116.19 per equity share, aggregating Rs 3,41,79,36,610 to Qualified Institutional
Buyers (QIB).
Break Up of Expenditure
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Company Profile
Radico Khaitan (RKL), established in 1943 as Rampur Distillery, is one of the India's
oldest and largest liquor manufacturers. The company owns three millionaire brands
namely 8 PM Whisky, Contessa Rum and Old Admiral Brandy. Its 8 PM Whisky brand
sold one million cases in first year alone creating a record or any Indian or foreign
brand operating in India. Due this it became first brand in the liquor industry to make
it to the Limca Book of Records. Radico Khaitan has been successful in creating
brands in various segments of whisky, rum, brandy, vodka and gin. In 1997 the
company got merged with Abhishek Cement and was renamed as Radico Khaitan.
Its Rampur distillery located at Uttar Pradesh is one the largest distilleries in India
and a leading manufacturer of Extra Neutral Alcohol, Rectified Spirit and Anhydrous
Alcohol. Recently grain distillery was added to the existing distillery increasing it
production capacity from 60 million litres p. a to 90 million litres p.a. Company’s
manufacturing plants are located at Uttar Pradesh, Rajasthan, Andhra Pradesh,
Uttaranchal and Haryana.The company entered into 50:50 joint venture with Diageo
Radico Distilleries to market Masterstroke Whisky. The company has presence in 30
countries and offers a unique 5cl Sachet pack for greater market penetration. The
company owns largest distilleries in Asia and produces Extra Neutral Alcohol from
molasses and grains. It is the largest exporter of Extra Neutral Alcohol from India.
Company Products
Whisky
It launched 8 PM whisky in 1999, which later became one of the biggest brands. Later
it launched various brands like Whytehall, Rampur No.1, Radico Supreme Gold,
Special Appointment and Old Admiral.
Rum
Under this it has launched 8 PM Bermuda, Contessa and Old Admiral.
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Brandy
It markets brandy under the name Old Admiral and 8 PM Excellency Brandy.
Vodka
It markets vodka under brand name Contessa and Magic Moments (remix and grain).
It also manufactures Gin and markets under the brand Magic Moment and Contessa.
Distilleries & Units
Rampur Distillery
Rampur Distillery is one of the largest distilleries in India and a leading manufacturer
of Extra Neutral Alcohol (used in manufacturing Indian Made foreign Liquor) it also
manufacturers Rectified Spirit (used in manufacturing of lower segments Country
Liquor) and manufacturing of Anhydrous Alcohol or Ethanol or Gasohol (used in Petrol
Mixing) and the recent addition of grain distillery . At present with a production
capacity of 60 million liters p. a and with the recent addition of the grain distillery
which has taken the capacity up to 90 million lit p.a it is one of the largest distilleries
in the country The Unit has a series of firsts to its credit:
It is the first Indian distillery to obtain ISO 9001:2000 certifications.
It has achieved capacity utilization of over 100% in the alcohol plant.
It is the first environment-friendly distillery in the country.
Capacity
Molasses Distillery 60 million litres per annum.
Grain Distillery 30 million litres per annum.
Malt Distillery 460 thousands liters per annum.
The overall licensed capacity has been increased to 125 million liters per
annum.
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Own Bottling Units
Rampur Distillery has 14 state-of-the-art bottling lines, including those imported from
Italy, equipped with tunnel bottle washing, filling, sealing and labeling machines with
a capacity to produce 1500 cases (1 case = 12 bottles of 750 ml each) of liquor in a
single shift of operation. Line capacities vary from 750 cases to 3,000 cases in a shift.
To keep pace with the growing demand, Radico Khaitan has significantly increased its
bottling capacity by acquiring/setting up bottling plants in the states of Rajasthan,
Uttranchal and Andhra Pradesh.
Rampur Distillery, Rampur (Uttar Pradesh).
Radico Khaitan Limited – Malt spirit Plant, Rampur.
Radico Khaitan Ltd., Bajpur (Uttaranchal).
Radico Khaitan Ltd., Reengus (Rajasthan).
Radico Khaitan Limited – Grain Spirit Plant.
Radico Khaitan Ltd., Hyderabad (Andhra Pradesh).
Strategic Bottling Units
Radico Khaitan Ltd is working continuously towards increasing its reach through the
strategic bottling units across the country. The focus underlines comprehensive
quality control and enhanced market penetration.
NORTH
N V Distilleries & Breweries Ltd., (Punjab).
Himalayan Gold Distilleries (Himachal Pradesh).
Oakland Bottlers (P) Ltd. (Jammu & Kashmir).
M/s Rajasthan Liquors Pvt Ltd Derabassi (Punjab).
M/s NID – Jammu.
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EAST
Goodhost Liquors (P) Ltd., Patna, (Bihar).
M/s Prashant Impex –Dankuni, Kolkata, (West Bengal).
Seven Sisters Trade & Distilleries (P) Ltd., Guwahati.(Assam).
Bacchus Bottling (P) Ltd., (Orissa).
United Brothers Distilleries (P) Ltd., (Arunachal Pradesh).
Gemini Distilleries (Jharkhand) (P) Ltd., Ranchi, (Jharkhand).
M/s Uno-Koti Bottling – Tripura.
M/s North-East Bottling – Shillong Meghalaya (To be closed in 2008-09).
SOUTH
Kamal Wineries, Hyderabad (Andhra Pradesh).
M/s Gauthami Agro – Eluru (Andhra Pradesh).
Ravikumar Distilleries (Pondicherry).
United Distillery, Calicut, (Kerala).
Sri Venkateswara Distilleries, Bangalore, (Karnataka).
BT & FC (P) Ltd., Bangalore, (Karnataka).
Midas Golden, Chennai, (Tamil Nadu).
M/s EMPEE DISTILLERIES – CHENNAI.
M/S SAFIL – CHENNAI – (Being started in 2008-09).
DRDPL (DIAGEO-RADICO) – M/S CHAMUNDI BOTTLING –BANGALORE.
WEST
M/S BMSS – SHRIPUR (Maharashtra).
Welcome Distilleries, Bilaspur. (Chattisgarh)
Silver Start Distillery, (Daman).
Gwalior Distillers, Gwalior (Madhya Pradesh).
DRDPL (DIAGEO-RADICO) – M/S AABPL-BARWAHA, INDORE (Madhya
Pradesh).
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Strengths
Strong Financials.
Wide distribution network.
Effective advertising.
Opportunities
The Company plans to capture significant volumes into the high liquor
consuming markets like Kerala, Tamil Nadu, and Andhra Pradesh and also to
increase its market share in the other existing markets. Company aims to
achieve sales volume of more than 20 million cases per year in next 2 years.
The Company has also re-launched its 'Royale Whytehall' whisky in new pack
in the key markets. Company believes that its branded portfolio constitutes
significant value creation for its shareholders.
The key drivers for growth of the company in future would be launching of new
brands and increase in the volumes in various markets, acquisitions of brands
and creation of own production facilities for bottling, major thrust to exports
including bottling arrangements abroad.
Threats
Higher prices of Molasses.
Industry suffers from high levels of duties and taxes.
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Financials Results
12 Months Ended Profit & Loss Account (Standalone) Value(Rs.in million) FY08A FY09A FY10E FY11E
12m 12m 12m 12m
Description
Net Sales 8094.12 6960.29 8557.45 9584.34
Other Income 141.02 10.57 31.45 34.59
Total Income 8235.14 6970.86 8588.90 9618.94
Expenditure -7282.18 -6164.51 -7158.98 -8002.93
Operating Profit 952.96 806.35 1429.92 1616.01
Interest -371.71 -451.47 -629.30 -679.65
Gross Profit 581.25 354.88 800.61 936.36
Depreciation -189.84 -231.22 -250.63 -263.16
Profit before Tax 391.41 123.66 549.99 673.20
Tax -60.70 -58.30 -102.29 -127.91
Profit after Tax 330.71 65.36 447.70 545.30
Equity Capital 204.92 204.92 205.61 205.61
Reserves 2155.84 2007.26 2454.96 3000.26
Face Value(Rs) 2.00 2.00 2.00 2.00
EPS 3.23 0.64 4.35 5.30
*A=Actual, *E=Estimated
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Quarterly Ended Profit & Loss Account (Standalone) Value(Rs.in million) 30-Jun-09 30-Sep-09 31-Dec-09 31-Mar-10
3m(A) 3m(A) 3m(A) 3m(E)
Description
Net Sales 1930.29 1870.90 2378.13 2378.13
Other Income 0.35 30.53 0.27 0.30
Total Income 1930.64 1901.43 2378.40 2378.43
Expenditure -1591.28 -1551.92 -2018.15 -1997.63
Operating Profit 339.36 349.51 360.25 380.80
Interest -153.62 -160.16 -156.20 -159.32
Gross Profit 185.74 189.35 204.05 221.47
Depreciation -62.50 -62.50 -62.50 -63.13
Profit before Tax 123.24 126.85 141.55 158.35
Tax -16.20 -29.70 -26.30 -30.09
Profit after Tax 107.04 97.15 115.25 128.26
Equity Capital 204.92 204.92 205.61 205.61
Face Value 2.00 2.00 2.00 2.00
EPS 1.04 0.95 1.12 1.25
*A=Actual, *E=Estimated
Key Ratios
Particulars FY08 FY09 FY10E FY11E
EPS (Rs.) 3.23 0.64 4.35 5.30
EBITDA Margin (%) 11.77% 11.59% 16.71% 16.86%
PAT Margin (%) 4.09% 0.94% 5.23% 5.69%
P/E Ratio (x) 33.85 196.74 28.82 23.66
ROE (%) 14.01% 2.95% 16.83% 17.01%
ROCE (%) 9.83% 6.24% 11.78% 12.38%
EV/EBITDA (x) 11.75 15.95 9.02 7.98
Debt-Equity Ratio 2.29 3.17 2.76 2.41
Book Value (Rs.) 23.04 21.59 25.88 31.18
P/BV 4.74 5.81 4.85 4.02
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Outlook and Conclusion
At the current market price of Rs.125.50, the stock is trading at 28.82 x FY10E
and 23.66 x FY11E respectively.
Price to Book Value of the stock is expected to be at 4.85 x and 4.02 x
respectively for FY10E and FY11E.
Earning per share (EPS) of the company for the earnings for FY10E and FY11E
is seen at Rs.4.35 and Rs.5.30 respectively.
Net Sales and PAT of the company are expected to grow at a CAGR of 6% and
18% over 2008 to 2011E respectively.
The company has more than 35,000 shareholders. It is the most profitable
company in the domestic liquor industry.
The company has presence in 30 countries and offers a unique 5cl Sachet pack
for greater market penetration.
RKL has set up a second grain-based distillery in Aurangabad, Maharashtra
with an investment of Rs136 crore.
The Company plans to capture significant volumes into the high liquor
consuming markets like Kerala, Tamil Nadu, and Andhra Pradesh and increase
its market share in other existing markets The Company aims to achieve sales
volume of more than 20 million cases per year in next 2 years.
On the basis of EV/EBITDA, the stock trades at 9.02 x for FY10E and 7.98 x
for FY11E.
We expect that the company will keep its growth story in the coming quarters
also. We recommend ‘BUY’ in this particular scrip with a target price of
Rs.144.00 for Medium to Long term investment.
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Industry Overview
Globally, over 133 billion litres of beer is sold each year. In comparison, the Indian
beer Industry contributes a meagre 1.28% of the global sales. The industry has been
witnessing on an average, a steady growth of about 10% per year over the last ten
years with volumes crossing 172 million cases in 2008-2009 from 70 million cases in
2002. With a relatively younger population and income levels on the rise, India is
seeing an increase in the popularity of beer.
Consumption of beer in India is also constrained by lack of adequate market
infrastructure. In China for instance, there is one outlet for every 300 persons. In
contrast, India has one outlet for every 21,000 persons hampering free availability of
beer. Total consumption of beer in China grew by 33.56% between the years 2000
and 2006 to reach a total market volume of 30.47 billion litres. With a per capita
consumption of 22 litres, China is one of the largest beer consuming nations in the
world.
Though beer is a milder form of alcohol, it is taxed by most states on the same basis
as Spirits. The charge is on absolute alcohol basis. Globally on a per unit of alcohol
basis, beer bears approximately 50% of levies imposed on Spirits whereas in India
taxation is regressive on beer.
India is predominantly a hard liquor market and beer has a minority preference
amongst those who consume alcohol. The per capita consumption of beer constitute
a meagre 3% of global average. Typically the size of beer volumes in most countries is
7 to 10 times larger than spirits, whereas in India, spirits is larger.
The alcoholic beverage industry in India operates under a very complex regulatory
environment which is the biggest challenge. In addition to restrictions on advertising,
distribution infrastructure and retailing, varied tax structures, controlled pricing and
licensing make operations more complex, consequently leading to higher costs,
though providing entry barriers for new entrants as well.
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The Indian beer market is dominated by strong beer which accounts for 74% of the
total beer sale.
The market for alcoholic beverages has been growing consistently. 'The Future of
Wine', a report on the state of the wine industry over 50 years, suggests that the
market for wine in India was growing at over 25 per cent per year.
________________ ____ _________________________ Disclaimer:
This document prepared by our research analysts does not constitute an offer or solicitation
for the purchase or sale of any financial instrument or as an official confirmation of any
transaction. The information contained herein is from publicly available data or other
sources believed to be reliable but do not represent that it is accurate or complete and it
should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it’s
affiliates shall not be in any way responsible for any loss or damage that may arise to any
person from any inadvertent error in the information contained in this report. This document
is provide for assistance only and is not intended to be and must not alone be taken as the
basis for an investment decision.
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