I last wrote about Radico Khaitan when Rakesh Jhunjhunwala grabbed a chunk of 6,85,112 shares in June 2014.
The fact that Ashish Dhawan was already sitting pretty in the stock with a massive holding of 24,34,195 (now 32,34,195) shares told me that good things were around the corner for Radico Khaitan.
All indications at the ground level were/are that liquor stocks would/will shine given the size of the market and the huge amounts of money that Diageo is pumping into United Spirits.
Amongst a bevy of analysts, Daljeet is also bullish on the stock. He has been periodically recommending a buy.
Unfortunately, Radico appears to have lost its way somewhere. It has been consistently reporting dismal & disappointing results. The latest Q1FY15 results are an example. Though the revenue increased 3.5% y/y to Rs.369 crore, the EBITDA plunged 8.8% Y/Y to Rs.48 crore. The net profit plunged a whopping 26.4% Y/Y to Rs.16 crore versus Rs.22 crore in Q1FY14.
The consequence of this dismal performance is that the stock price has been battered out of shape. It hit the lower circuit today and has slid to a 52-week low of Rs. 92.
This has led to heavy losses for Rakesh Jhunjhunwala, Ashish Dhawan and several other marquee investors in Radico.
Rakesh Jhunjhunwala appears to have lost confidence in the stock. He has been gently selling the stock. In the April to June 2014 quarter, he finally got rid of his holding in the stock.
However, all is not lost for Radico Khaitan or its’ heavyweight believers. Daljeet Kohli and Amar Mourya have now rushed out a “Flash Note” urging a buy. Here’s what they say:
“At CMP of Rs.97, the stock is trading at 11.8x FY15E and 10.3x FY16E Bloomberg earnings estimates. The current valuation offers attractive discount relative to last three years average P/E multiples of 19.0x one-year forward earnings. The revival in flagship brands, premiumisation, and strong macro demand in tier-2 and tier-3 cities, along with expected stable molasses prices (due to favourable monsoon) remain positive for the stock. Further, the transformational deal of Diageo plc with United Spirits Limited could provide window of opportunity to Radico”.
The best part is that the dynamic duo of Daljeet and Amar has promised a price target of Rs.190 for Radico Khaitan, which is a whopping 100% gain from the CMP.
As usual, Daljeet’s advice is logical and convincing. Hopefully, this flash note will calm the frazzled nerves of Radico’s shareholders and sustain their faith in the beleaguered stock.